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29-03-2013, 02:57 PM
(This post was last modified: 29-03-2013, 02:57 PM by buaypangsai.)
PCCS, to buy or not to buy.
Suppose the VWAP is 70 cents, so the conversion price is set at 80.5 cents. If you have 4000 Tiger shares, you can buy 1000 Tiger PCCS at $1070. After you do that, for 5 years you get 2% x 1070 = $21.40 distributions per year, plus the equivalent of any dividends that are paid to ordinary shares, as if you were holding ordinary shares. (Note that Tiger has yet to pay any dividend.) After the 5 years are up, Tiger does not give you any more distributions. Tiger can choose to redeem the PCCS earliest at 7 years after the issue date.
The following assumes conversion price 80.5c and no future changes to it:
Scenario 1: Tiger shares are at $1 after 5 years and you convert. You will get 1070/0.805 = 1329 ordinary shares, for which you can sell at $1 each to get $1329. Your return is $1329 + $21.40x5 - $1070 = $366 over 5 years; annualized it is about 6%.
Scenario 2: Tiger shares are at 90 cents after 7 years and you convert. Your return is $(0.90x1329) + $21.40x5 - $1070 = $233.10 over 7 years; annualized 3%.
Scenario 3: This is the basic case. Tiger shares never reach 80.5 cents so you never convert. You get all your 5 ordinary distributions on time, no special distributions, and Tiger redeems after 7 years. Your return is $107 over 7 years; annualized 1.4%.
Scenario 4: Tiger shares never reach 80.5 cents again so you never convert. Due to financial difficulties Tiger has chosen to defer all its 5 ordinary PCCS distributions. Needless to say there are also no special PCCS distributions (i.e. dividends payable to ordinary shareholders). After 10 years it finds the money to pay you your distributions and put the PCCS out of its misery. Then your return is $21.40x5 = $107 10 years later; annualized 0.96%.
It seems to me like PCCS has little pricing effects during XA date this week. Or perhaps ZERO effect due to the difficulty in forecasting its pricing like a warrant.
The day before XA, it closed at $0.70. The theoretical open during XA should have been $0.662, but it opened at $0.67. Looking good huh.
I've decided to opt for RIGHTS AND EXCESS RIGHTS (the last time they did give me excess).
Wish me good luck.
Suppose the VWAP is 70 cents, so the conversion price is set at 80.5 cents. If you have 4000 Tiger shares, you can buy 1000 Tiger PCCS at $1070. After you do that, for 5 years you get 2% x 1070 = $21.40 distributions per year, plus the equivalent of any dividends that are paid to ordinary shares, as if you were holding ordinary shares. (Note that Tiger has yet to pay any dividend.) After the 5 years are up, Tiger does not give you any more distributions. Tiger can choose to redeem the PCCS earliest at 7 years after the issue date.
The following assumes conversion price 80.5c and no future changes to it:
Scenario 1: Tiger shares are at $1 after 5 years and you convert. You will get 1070/0.805 = 1329 ordinary shares, for which you can sell at $1 each to get $1329. Your return is $1329 + $21.40x5 - $1070 = $366 over 5 years; annualized it is about 6%.
Scenario 2: Tiger shares are at 90 cents after 7 years and you convert. Your return is $(0.90x1329) + $21.40x5 - $1070 = $233.10 over 7 years; annualized 3%.
Scenario 3: This is the basic case. Tiger shares never reach 80.5 cents so you never convert. You get all your 5 ordinary distributions on time, no special distributions, and Tiger redeems after 7 years. Your return is $107 over 7 years; annualized 1.4%.
Scenario 4: Tiger shares never reach 80.5 cents again so you never convert. Due to financial difficulties Tiger has chosen to defer all its 5 ordinary PCCS distributions. Needless to say there are also no special PCCS distributions (i.e. dividends payable to ordinary shareholders). After 10 years it finds the money to pay you your distributions and put the PCCS out of its misery. Then your return is $21.40x5 = $107 10 years later; annualized 0.96%.
It seems to me like PCCS has little pricing effects during XA date this week. Or perhaps ZERO effect due to the difficulty in forecasting its pricing like a warrant.
The day before XA, it closed at $0.70. The theoretical open during XA should have been $0.662, but it opened at $0.67. Looking good huh.
I've decided to opt for RIGHTS AND EXCESS RIGHTS (the last time they did give me excess).
Wish me good luck.
asking for money again....