Den of The Lion Investor

Following the lead of DBS and OCBC, United Overseas Bank Limited (UOB) might be the third local bank to issue their own UOB preference shares during this period of financial turmoil.

Newspaper reports indicated that the yield might be 5.05%, which is slightly lower than the 5.1% offered by OCBC recently.

UOB has confirmed that they are currently considering issuing the preference shares and had already submitted a listing application to The Singapore Exchange Securities Trading Limited.

Once the necessary approval has been obtained, more details will be posted here of the UOB preference share offer.

Soon after the recent OCBC preference shares issuance, OCBC has decided to issue more preference shares to further balance its capital base.

This time round, they will be issuing 10,000,000 preferences share at a price of $100 each. If demand is good, this might be increased to 15,000,000 shares.

Out of these 10,000,000 OCBC preference shares, 2,500,000 will be offered to retail investors while the rest will be offered to institutions.

The retail application will be available via ATM application of Singapore’s three local banks starting from 9am today, until 12 noon on 26th August. The ATM subscription will be subjected to balloting if demand exceeds supply. Since the minimum subsciption this time round is 100 shares (compared to 200 shares previously), more people might be able to apply for it.

The preference shares will provided a dividend of 5.1% per annum which will be paid semi-annually in March and September till 20th September 2018. They are perpertual securities with no fixed maturity dates. They may however, be redeemed by OCBC on 20th September 2018 and each dividend date thereafter (subject to MAS’s approval).

After 20th September 2018, the dividend rate will no longer be fixed at 5.1% p.a. Instead, the rate will be tied to the 3-month Singapore dollar swap offer rate plus 2.5%. Dividends from that point onwards will be payable every 3 months.

The 3-month swap offer rate is a rate that is slightly higher than the 3-month SIBOR. You can find out the historical SIBOR rates from MAS’s financial database. Refer to “interbank 3-month”. For current rates, you can refer to a copy of The Business Times.

The OCBC preference shares are expected to list on SGX from 28th August 2008. More details on the OCBC preference shares offering can be downloaded here:

OCBC preference shares

The ATM application for the $50 million second tranche of OCBC preference shares opens from 9am today until noon on 28th July. You can apply for them through the ATM of the 3 local banks - DBS, UOB and OCBC.

Each application requires a minimum subscription of 200 shares priced at $100 each. Additional shares are in multiplies of 100.

Unlike the first tranche which was on a first-come-first-served basis, this ATM tranche will be allocated by balloting if the total subscription exceeds 500,000 shares. That means you do not need to rush down to an ATM machine to apply at 9am today.

However, if you are interested in applying for the shares, it is wise not to wait too long as OCBC might close the tranche anytime if overwhelming demand is received.

The other day, a contractor from City Gas came down to my house to do a site inspection. I had requested for him to check whether it was feasible to install the City Gas water heater and clothes dryer in my home.

The reason why I did so was that I was attracted to a recent promotion that City Gas was running. They were offering a package of the City Gas Water Heater and Dryer at $688 or the Heater at only $168.

According to the illustrations given, using a City Gas Heater in place of an electric one will cut the energy cost from about $30 to $10. This is a significant reduction.

Using a City Gas Dryer will reduce the cost from $5.73 to $3.88. This works out to be about 30+% reduction.

Unfortunately, the contractor deemed my house to be unsuitable for doing the installation. Thus, I was unable to proceed.

With energy costs increasing, people will become more conscious of such savings and there might be more people switching to the use of City Gas products.

The beneficiary of this would be course be City Spring, a listed infrastruture trust that is pretty much a dividend play. The current price of $0.775 offers a yield of about 8.3% p.a. The lowest price ever reached was about $0.70.

Of course, investors should remember to bear in mind the (ridiculous) performance fee structure, which is based upon the share price.

As a result of a spike in the share price in the past, the managers collected a huge performance fee. I can’t remember how much it was but I remembered it was a huge chunck of reported earnings.

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Just a day after Unisteel posted an announcement requesting for a suspension in the trading of their shares and a cautionary note saying that the transaction may or may not materialise, they released this piece of news today:

Proposed Acquisition of Unisteel Technology by Kohlberg Kravis Roberts & Co (KKR)

From the press release, we find out that KKR, a leading global alternative asset manager, has offered to pay S$1.95 per share, or S$785 million for Unisteel. The offered price is a 19.6% premium to the closing price of Unisteel the day before trading was halted.

The two parties have agreed to a deal.

The price of $1.95 is at 17.7 times of the unaudited full year earnings of Unisteel for the 12 months ending 31st March 2008. It is also at multiple of 5.8 times the price-to-net tangible assets based on the audited net tangible assets per share as at 31st March 2008.

The full offer document can be found here:

Scheme of Arrangement for KKR Acquisition of Unisteel Technology

To all Unisteel shareholders, congratulations!