mfbs, u keep kutuk Boustead but still hang out here. so concern about boustead business. u really help traders investors here. dont hold anymore, correct?
Be extra careful of the balance sheet of Boustead. The Islamic Bond Sukuk. having a value of RM 609.3 m is considered part of equity instead of debt or liability. So on paper for example the gearing would appear low and causes other financial figures to be distorted as well. Just a reminder though.
This so called perpetual bond is like a hidden time bomb, not seen by most people but can caused a lot of damage especially when the company has to redeem it or pay ever increasing higher interest penalty if not redeemed as agreed. This perpetual will soon coming for redemption toward this year end ! With very high debts burden and continuing losses, the future scenario is quite scary to say the least.
Yes, I remember reading about it many months ago and have forgotten about it. It's a time bomb unless they re-negotiate the terms. Who holds the sukuk?
The perpetual bond is an instrument with NO maturity date . I think the call to redeem it only rest with the issuer , not the lender. For this reason , the coupon rate for perpetual bonds is usually higher than the term bonds. The issuer can decide to redeem perpetual bonds and refinance with lower interest instruments. The accounting rules in most countries require perpetual bonds to be classified as equity as it can be there as long as the company want it to be. In fact many conglomerates in Malaysian issue perpetual bonds which is safer in term of capital or cash flow perspective. Borrowing in any form , more so in the case of perpetual bonds , is not a problem by itself . Ability to service and repay the borrowing is the key . So, pay more attention to the cashflow statement to track if company generate good free cash flow or not .
Appreciate if @Carlos can tell us where he get the information that perpetual bonds is due by this year . I far as I know perpetual bo Da has no maturity date ! Can Carlos also enlighten us where you get the information that interest rate can jump from 9.6% to 15%. As far as I know, bond coupon rate is fixed at the time of issue!
@Johnzhang, I did read something about it sometime last year while I was trying to determine the quantum of Boustead's huge debts. I think there's information in the financial statements in the Annual Report.
Thank Johnzhang for you write up. Yes no obligation to redeem on the maturity which is normally after the end the fifth year. However if not redeemed, the interest will be increased substantially. The info on interest rates are from the latest annual report available. Just for information, I think Thailand has recently classified perpetuals as liabilities , no longer as part of the equity. Personally I choose to classify perpetuals as debts.
After the 5th year, Boustead has the call option to redeem the sukuk at every anniversary but if it doesn't redeem, the interest rate increases by 1% every year until a maximum of 15%. The sukuk was issued in 2013.
The coupon rate can increase gradually over years to reach a limit provided all the terms are predetermined at the time of issue . To avoid paying increasing cost , the issuer can redeem and refinance with other cheaper instruments. I remember bstead has redeemed already half of the perpetual bonds just 2 years ago . If bstead has good positive cash flow from operating and investment activities,, serving and gradual redemption of the expensive perpetual bonds shall not be an issue .
Operating +investing cashflow of Bstead at group level is as below : Q1 2021. +$199 mil (90 mil required for interest servicing ) FY 2020. +$288 mil. ( 414 mil for interest servicing ) FY 2019 + $883 mil (424 mil for interest servicing ) Based on above , I think Bstead can still manage the loan servicing and obligations. What bstead needs to do quicken is monetising the non-performing and non core assets . Just how I read it .
I am amused to see a few fellows keep yelling rubbish in this forum without anything constructive to share. Don’t you think you too are rubbish for for staying in your perceived ‘rubbish bin’ . Hehe….
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
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Posted by Valgrovest > 2021-07-01 19:03 | Report Abuse
Maybe by end tomorrow they announce something....at the moment still brewing!