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CapitaMalls Asia: Borrowing on the cheap.

Sunday, January 23, 2011

On 6 Jan, this was reported on Channel News Asia:

"...CMA will issue $200 million worth of retail bonds.

It aims to raise $100 million by selling one-year bonds, which will pay 1 per cent interest.

The remainder will be raised by issuing 3-year bonds, which carry an annual interest rate of 2.15 percent.

The minimum sum that a retail investor needs to invest is $2,000.


...... Experts say bonds of highly rated corporates are an attractive investment, compared with government bonds.

One-year Singapore government bonds currently yield 0.4 percent annually.

Wilson Liew, an investment analyst, said the bond issuance should have little influence on CMA's performance.

"If you look at the quantum of the bonds, it is not large compared to the total size of the business," said Mr Liew.

CMA has retail properties worth $21.6 billion in its portfolio.

"They are making use of low interest rate environment to raise some money but they are lowly geared anyway so raising money isn't so difficult," added Mr Liew.
"


On 21 Jan, it was reported that the offer was approximately 1.82 times subscribed. Read report here.

Cheap debt is a good thing for a growing business. I am sure the management of CapitaMalls Asia will put the money to good use. Fundamentally, this company is in a net cash position and has predictable cash flow from its management business while divesting mature shopping malls to the REITs it manages could result in attractive gains periodically. I am looking forward to stronger numbers in the future.

Technically, I have not looked at the weekly chart for this counter before. Let's take a look:


The candlesticks are detaching from the lower Bollinger and we could see price moving towards the 20wMA which is currently at $2.06. There is still a downward bias but I like the higher lows on the MFI and RSI. Both momentum oscillators are still in oversold territories and this situation could be corrected sooner than later. 

We cannot say that we are surely seeing a reversal at this stage but a rebound to the 20wMA is not unattainable and could result in some decent gains for anyone buying at the trendline support which approximates $1.90 currently. I am, of course, vested.

A Chinese government think tank has forecast the nation's economy will grow around 9.8 per cent this year, with inflation likely to come in at 3.7 per cent, state media reported Sunday. Experts at the Chinese Academy of Sciences also predicted that gross domestic product would rev up in the latter part of the year, and would be driven largely by domestic consumption, the official China News Service said. Read article here.

Related post:
CapitaMalls Asia: Pulling back on low volume.

4 comments:

Marti said...

I wonder who would buy bonds that pay 1%. Especially when inflation is way higher than that.

AK71 said...

Hi Marti,

Yes, some of us wonder at the same thing.

I suppose people who would have put their money in Singapore Government Bonds would take up the offer. After all, it is 1% compared to 0.4%. ;)

Anyway, the bond issue is good for me as a shareholder of CapitaMalls Asia. So, I am not complaining. ;p

CL said...

i did. :) my flat is coming next year so took up the 1% rather then leaving it in FDwith 0.7%. :)

AK71 said...

Hi CL,

In your case, it makes sense. Good move. ;)

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