OLAM Stock Catching Down, Bonds Catching Up
| OLAMSP 6 10/25/22 | SGD | 81 | 83 |
| OLAMSP 5 3/4 09/20/17 | USD | 88.75 | 90 |
| OLAMSP 2 1/2 09/06/13 | SGD | 96.5 | 98 |
| OLAMSP 5.8 07/17/19 | SGD | 84 | 86 |
| OLAMSP 7 09/29/49 | SGD | 79.5 | 84 |
| OLAMSP 6 08/10/18 | SGD | 86 | 88 |
| OLAMSP 3 02/25/13 | SGD | 98.5 | 100 |
| OLAMSP 7 1/2 08/12/20 | USD | 90 | 92 |
| OLAMSP 4.07 02/12/13 | SGD | 97.5 | 99.5 |
* Table of indicative prices I trawled from Bloomberg. Not representative of dealing prices.
We are finally reading the textbook. Bonds are safer than stock.
New 3 year low in the stock at 1.425 as I type, the bonds are little changed at the moment.
Yes. There is potential for contagion but that should be discounted already. But take a look at the table. The USD 7.5% 2020 looks a tad high to me, as does the perp. I think the 2022 still presents value over the perpetual, but that is my opinion.
The perpetual should be going lower if the stock continues to tank towards a fairer value.
Textbooks also say that short dated bonds are generally safer than longer dated ones, and this is also been observed in the market. People were said to be selling long dated ones like the 18s and the perp, and switching into 13s, crossing bid-ask on both. Bid-ask for the perp can be 4 points wide, and shorter one maybe 50ct wide, so the result is an instant loss of 4.5 points. In my opinion, switching serve no purpose in such stressed period because if the company fails, fingers will be burnt, regardless of tenor of bonds, unless you are going up the credit curve for a higher recovery rate. Otherwise, minimise your loss in the switches when market is sober.
I wouldn’t touch either with a stick now, unless you are into distress investing.
The show just started.
http://www.businessweek.com/news/2012-12-05/olam-plunges-after-dee-calls-for-share-sale-singapore-mover
Anyone care to share with me their thoughts why there is such huge difference between 2022 6% and 2020 7.5%? The 2022 6% price seems to be same as the perp though its a senior bond so probably can get back something in the event of a default. Wondering if short sellers short sell bonds as well as well, mostly heard them short selling shares. Could 2022 6% be somehow parrticularly involved in the short sell? 🙁
Old issue and price probably not updated, I suspect. Now it looks like 89/90.
Small issue size USD 250 mio.
You can short sell bonds provided you can borrow them which makes it hard to short sell SGD bonds as the borrowing facility is hard to access.
The 2022 SGD paper is more badly hit, I guess, because it was issued so recently and I believe some people borrowed to buy and were hit by margin calls. Apparently >70% of the issue went to retail !
Great way to reward investors who only want to hedge for inflation !
And yes, the 2022 looks better than the perp in my opinion, assuming you can get the published price. More likely not, if you are retail.
Good luck man !
Thank you tradehaven for sharing your opinions.
I was thinking, shouldnt US dollar bonds be doing less well than SGD debts since SGD is expected to appreciate and USD will probably worth less if a Singaporean buy it when it matures? That is my own silly thoughts.
I also keep asking myself: what percentage of these bonds that went to retail went to SG retail and how much to US or other retails?
USD bond world is more liquid and diverse than Singapore. Investors have avenues to hedge and there are many more banks trading USD bonds than SGD.
The Olam SGD bonds went mostly to retail this year maybe because the institutions here like insurance companies thought it was too expensive and did not want to buy ? And the banks cannot hold so much and had to give the retail/private bankers more incentive to sell to the public ?
Only my thoughts as well.
Thank so much tradehaven, for sharing your insights and thoughts. One of my friends told me today that there’s a company TT international that Temasek used to have a stake in it but TT went bankrupt. I havent been following the news that time, how much share does Temasek used to have in TT and why did it go bankrupt? I was thinking did Temasek showed the kind of backing and support and TT still went bankrupt or it simply sold the shares when TT had problem? Was wondering if Temasek was a long term investor of TT (think Temasek invested in Olam even before it is listed in SGX).
Micheal Dee seems to have lots of suggestion for rejuvenation of Olam. But just wondering how effective it will be to support the price if Olam heed his advice and how likely is Olam is to follow. As a retail investor, what is important is to see the price going up actually. 🙂
Hahaha would be funny if Michael Dee was part of the investment team who had recommended Olam. Kidding.
TT Intl was a plain default case. Could not pay ‘cos could not raise the money. Their bank (not naming names) pushed out so many of their bonds cos the banks wouldn’t extend loans. Now you know why so many corporate bonds this year – because banks want to pass the risk out (if it were so good, they would keep it as a loan) ! hahaha just a silly opinion. (don’t sue me !!)
Btw does anyone know how did the bond prices fare today? 🙂
Hi Tradehaven, deeply thankful for sharing your insights and wisdom again. I am wondering, as far as you know, is Temasek a shareholder of TT international before it declare bankrupcy? And if so is Temasek a signifcant shareholder of TT? Thank you so much and have a wonderful weekend ahead.
Not sure if Temasek was invested in TT then, it was pretty much a penny stock then as it is now.
Does anyone have any idea how are the various Olam bonds performing this week? 🙂
Thanks a lot, Jim for the price information. I am praying that it will go back to more “normalised” values soon and continue a bit with the recovery as long as no more too impactful negative news breaks out in the weeks to come. Hope that this little xmas wish for mine is not something virtually impossible.
Looks like Olam bonds are recovering this week, though the perps looks like it will still take a little while longer.
Olam 6% 2018 89.50 / 92.00
Olam 6% 2022 85.00 / 87.00
Olam 7% Perps 80.00 / 84.00
Thanks a lot, Jim for the price information. I am praying that it will go back to more “normalised” values soon and continue a bit with the recovery as long as no more too impactful negative news breaks out in the weeks to come. Hope that this little xmas wish for mine is not something virtually impossible.
All the best in your price recovery. It would really take sometime to be anywhere near full recovery even if there is no major event. Perhaps 12-18 months. Other factors that affect bond prices are interest rate & especially company quarterly performance in the case of Olam.
Thank you for the good wishes. Lets not say full recovery – somewhere around the mid 90s region would be good enough at least. Wondering how long will that take? I think Olam’s next quarterly report will be out in Feb, hope they do something positive to convince the investors.
Btw regarding the article by Shayne Heffernan Ph.D. , he mentioned:
“As far as the technicals go on Olam’s chart there is no doubt it is in dangerous territory, but the key number that Muddy Waters will be pushing for is a break below the rights issue price, under $1.30 and Olam will have trouble. ”
May I ask what is the significance of the $1.30 value? Is he referring to the USD1.29 to convert the warrant to share in 3 years time? But that is in USD and the price now is already below 1.30 (I think around USD1.16) 🙁
Apologies, I’m not good in technicals. As a layman, I see $1.30 as the next support level if breach the stock prices could drift even lower. At least the company is not doing share backbacks in last Jun to conserve their valuable cash flows.
Note that the right issues in March. The new 6.75% bonds are priced at 95. For the rest to reach mid-ninties, these new bonds must rise above 100.
Thank you Jim for sharing your insights and thoughts. Anyone has any idea how did the bond prices for the various Olam bonds fare today as the week ends? Thanks in advanced.