Dividend Magic

Saving and Investing towards Financial Independence in Malaysia

Investment

Review of 2018

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Filed Under: Dividends, Financial Independence, Investment, Portfolio - Freedom Fund 2

Goals

2018 – Goals Dicapai

“Moving forward, maintaining that 4.5% yield will be the goal.”  – myself

In 2017’s ending post, I set myself the goal of maintaining my 4.5% yield.

I’ve managed that and then some. 4.92% to be precise.

Total dividends went from RM16K in 2017 to RM18K in 2018. A 13.62% increase.

2019 Goals – Financial Independence

  • Dividend yield > 5%
  • Total dividends > RM20,000 p.a.

I’ll be looking to break the 5% mark in 2019 with more savvy purchases. Got my cash in hand to start buying soon with the current downturn in the market.

As part of my push towards F.I. (“Financial Independence“), I’ll be aiming to have my dividends reach RM20,000 in 2019.

My FI goal is to have RM36,000 in passive income per annum. I’m halfway there in 2018 with RM18,000 in dividends.

I can’t wait for my dividends to snowball in the next few years and achieve FI by the age of 35. That’s when it’ll get interesting as I will have extra income to delve into riskier investments ie. startups.

Investment in the KLSE

2018 has been a wild ride for stock investors. The last few months, especially.

In fact, due to the recent slump in the market, my portfolio is in the red for 2018.  To the sum of about RM20,000.

I’m of course talking about capital losses. ie. unrealized losses. 

This would be a good time to remind everyone of the significance of long-term investing and holding power.

When you invest, make sure you have the ability to hold a stock for at least 10 years. Even better, have cash on hand to take advantage of the drop in prices during recessions.

Always stay invested.

My Portfolio

Freedom Fund – RM443,435.79
IRR – 8.60%
Dividends – RM18,072.25
Dividend Yield – 4.92%

If you haven’t already, I’d like to invite you to have a look at the Freedom Fund. Take notice of the increase in yields over the years.

Overall, the Freedom  Fund is still making money, to the tune of 8.60% per year. This includes both capital gains as well as dividends.

8.60% still isn’t good enough. My main focus right now is to catch up and reach the 10% mark.

Dividend Magic – the site

Dividend Magic started out as a place of accountability for me personally. To keep me and my investing honest and truthful.

To have a public space on the interwebs to show Malaysians that investing isn’t difficult. To demonstrate that if you’re disciplined in your investing, you’ll have a steady source of passive income that will see you through the rest of your life.

I’m happy to have built a nice community here where everyone is able to chat and discuss in a non-toxic environment. Grateful to have met many awesome people in 2018 and looking forward to 2019.

FOLLOW

If you haven’t already, follow me on Facebook and Instagram to keep up with everything else about me. You’ll see a different side of Dividend Magic on those platforms.

End.

Dividend Magic - We can do it!
Rosie the Riveter

As we head into 2019, I hope most of you who’re reading have started investing. Be it in stocks or other assets.

Post your portfolio value, dividends and dividend yield here and I’ll hold you accountable. We will revisit it again together at the end of 2019 and see how everyone is doing.

I’ll keep it simple and title all year-end posts – A Review of 201… 

Thank you for reading as always. To 2019!

Investing in Malaysia – Your 7 Investment Options

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Filed Under: Dividends, FI/RE, Investment, Portfolio - Freedom Fund 19

What can I and should I do with my savings and excess funds? What are my investment options in Malaysia. That ought to be the question in the back of our minds, constantly.

My train of thought has always been as follows.

Savings – Investment – Passive Income – Reinvestment – Financial Independence

I know, Dividend Magic is almost always about Dividend Investing. And, I’m aware it can be somewhat intimidating for most of you to start dabbling in the stock market and investments in Malaysia.

In light of that, allow me to introduce the 7 viable, long-term investment options in Malaysia that might suit your needs.

When I say investing, I mean investing and not speculating. The difference?

Investors seek to generate a satisfactory return on their capital by taking on an average or below-average amount of risk. On the other hand, speculators are seeking to make abnormally high returns from bets that can go one way or the other.

The list is arranged from safest to riskiest.

Fixed Deposits (“FDs”)

Returns per annum: 3 to 4%

CIMB Unfixed Deposit
CIMB’s Unfixed Deposit

Let’s start with the simplest of them. Fixed deposits or FDs if you will.

Now, I wouldn’t even classify fixed deposits as investments. They’re more of a financial instrument where you place your money while waiting for investment opportunities.

Most of you may have heard of fixed deposits but I know for a fact that most Malaysian youths have their money in savings accounts. And they leave it at that. So instead of earning 3-4%, they earn that miserable 0.1 – 1% provided by most savings account.

And yes I know M2U savers gives you 2%.

Where can you place FDs?

I’d suggest going to your own bank and opening an online FD account. It is important to have an online account as it will save you time. You’ll be able to handle all fixed deposit placements and upliftments through the click of a button without having to be physically present be at a branch.

Treasury Notes and Bonds

Returns per annum: 4 to 6%

Before everyone starts making a fuss about how bond returns can go up to 8-9%, let me remind you that this article focuses on long-term and calculated investments in Malaysia, for the masses.

And the term used for high-risk, high return bonds is Junk Bonds.

Moving on, treasury notes are actually safer in comparison to fixed deposits because they’re issued by the government. However, they’re usually issued in the millions and not for most of us.

Bonds, if you don’t already know are a fixed income investment in which you, as the investor loan your money to a company. In the event that the company goes broke, you as the bondholder gets paid first, before the company’s shareholders.

In the past, the way I invested and put my money into bonds was through mutual funds via Fundsupermart. I’ve been told that they’ve recently started offering bonds right off the bat broken down into lower values ie. RM10,000. This makes it easier for the average Malaysian to get a piece of the bond action.

Gold and Silver

Returns per annum: N/A

Look, there’s no way I’m going to give you an estimate on the returns of trading in precious metal. One thing holds true, however, during times of uncertainty, the price of gold and silver goes up. They, therefore, serve as a good defensive asset.

If you time it correctly and buy them during economic booms, you’ll have an investment that will see you through the decades ahead.

Silver Coins

Personally, I chose to invest in silver years ago. The way I invested was by buying and collecting silver coins offered by various governments around the world. My favourite is the American Eagle and Canadian Maple coins. The Chinese Panda coins are also part of my collection.

My coins cost a total of RM2678 back when I purchased them in 2013 and in 2015. They’re now worth about RM2975. About RM95 each. Cheapest I found on Malaysian sites.

That’s about a 10% gain for me over 5 years. It’s nothing to shout about but I’ve seen my silver increase to 50-100% during recessions. Still, I don’t plan to dispose of them anytime soon.

Stocks

Returns per annum: 3-10%

Welcome to my neck of the woods.

Investing in stocks in Malaysia has always been viewed as a risky business. Why? Because Malaysians confuse investing with speculating.

In my personal, honest opinion, Dividend Investing is a really safe and sound way to invest and achieve financial independence.

Dividends are like the gift that keeps on giving because as the company you invest in grow and increases its profits, the dividends they pay out increases every year subsequently.

But guess what? You would have still paid that same RM10K initial capital and your dividend yield will continue to increase every year. A quick look at my portfolio – the Freedom Fund would show that sweet increment in dividends.

Of course, to enjoy these kinds of returns and yields, you’ll have to get some legwork in and pick only financially sound companies to invest in. And you’ll have to invest for the very long term. Think 10 – 30 years.

I’ve compiled a list of the Best Dividend Stocks in Malaysia here for your perusal.

Blue-Chip Defensive Stocks

Now, blue-chip defensive stocks like NESTLE are stable stocks you can hold for the rest of your lives. You’ll receive increasing dividends every year without ever having to work for it.

And because blue-chip companies are huge and stable by themselves, they won’t be as affected by the volatility of the market.

Another fine example would be investments in Malaysian banks. My  RM26,527.86 investment in Maybank alone since 2016 has brought in a total of RM4,685.36 in dividends alone. That’s a 17% return in passive income for me. I’m enjoying a 7% yield this year with Maybank and hope to see this value increase in the near future.

Real Estate Investment Trusts (REITs)

Another type of stocks that I always encourage beginners to invest in Malaysia are Real Estate Investment Trusts.

My all-time favourite Malaysian REIT right now is IGB REIT. They’re mainly in charge or Mid Valley Megamall and The Gardens.

The dividend yield from IGB REIT has skyrocketed to RM2,865.43 which translates to 7.09% for me this year.

My gross investment is RM40,417.74 (at RM1.3563 per share).

Market value (as of 9 Dec’18) is RM50,660.00 (at RM1.70 per share).

My capital gain is RM10,242.26 or 25.34%.

A comprehensive review of the company can be found hERE.

Real Estate

Returns per annum: 3-10%

Property. This is a tricky one for Malaysians.

The current mentality of Malaysians is to purchase your first residential real estate right off the bat. If your monthly salary is RM5K, get a home that’ll cost your RM4k in monthly repayments. They’ll tell you to hold on to that and in 10 years time, sell it and double your money.

This isn’t investing. This is speculation. A savvy investor would look to a property that can not only cover your monthly repayments but give you a positive net income every month.

And from what I’ve seen and from personal experience, the only two types of real estate that can give you positive returns right now are low-cost residences and commercial properties.

If you’re looking to buy and hold and bank on the real estate’s value skyrocketing, you’re better off purchasing a piece of land.

Low-cost Residences

I personally own 2 low-cost flats. How I manage and my returns are all detailed hERE.

TLDR: They net me a positive income every month. But they’re giving me a headache in terms of maintenance and tenant management. I’d rather have invested my money in REITs.

Commercial Real Estate

Specifically, shop lots and offices. Having companies and registered businesses as tenants is a much less risky affair compared to low-cost residential tenants.

The cons. You’ll have to fork out a huge sum to get yourself a commercial lot.

Unit Trusts and Mutual Funds

Returns per annum: 1-5%

I am for all intents and purposes anti Unit Trusts and Mutual Funds here in Malaysia. Why? Read this article here and you’ll come to realize how the exorbitant fees charged by funds in Malaysia will impact your financial wellbeing.

Private Retirement Schemes (PRS)

Nevertheless, I’d recommend investing and putting your money in Private Retirement Schemes. If you’re a Malaysian youth, you get an extra bonus from the government. If not, there’s always that extra tax-deductible afforded when you put your money into PRS. More on PRS hERE.

Robo-Advisors

You’ll also want to check out Stashaway. You pay much less fees compared to Unit Trusts and Mutual Funds. And you get access to the global markets.
Less fees!

More on Stashaway hERE.

P2P Lending

Returns per annum: 10-12%

Funding Societies

I’ll never recommend investments and services I wouldn’t use and/or purchase myself. I’ve put up some of my own funds and tried P2P lending with Funding Societies.

My experience and the review can be found hERE.

All you need to know about Peer to Peer Lending and Funding Societies can be found there. My annualised returns have reached 13.12% per annum.

Which actually beats the returns from my stock portfolio last year. Go figure.

The risk with P2P lending here in Malaysia isn’t high at all contrary to popular belief. It ranges in the 0.1 to 0.5% right now. The key is to diversify and place RM100 in 100 different loans, as opposed to RM1,000 in 10 loans.

End.

I’ve personally invested in all 7 of the aforementioned investment options here in Malaysia.

I’m sure many of you will have additional investments not listed above that you’ve put your money and faith in; Do drop me a comment letting me know what they are and why you think they’re investments worth considering.

I’m both excited and eager to hear what Malaysians invest in.

As always, due diligence on your own part is required when deciding to invest. I urge you again to invest and not speculate. Invest for the long term and invest in the fundamentals.

This has been a particularly long one. That’s what she said.

As always, thank you for reading! Follow me on Facebook and Instagram for weekly dividend updates!

Onwards and upwards!

Nestle (Malaysia) Berhad – Household Food Products in Malaysia

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Filed Under: Companies in the News, Best Dividend Stocks in Malaysia, Investment 1

Here’s a company whose products you’d definitely find around your household as a Malaysian. Boasting a huge range of food products, NESTLE has its tentacles everywhere.

While NESTLE has had to deal with its fair share of criticisms (aka the Milo incident), it has bounced back from it with a range of new products. And new profits.

Nestle Malaysia 2017 Annual Report

This here analysis is based on NESTLE’s 2017 annual report which can be downloaded here: nestle_annual_report_2017

Being awarded the ‘Highest Return on Equity Over the Past Three Years’ is no small feat.

NESTLE AGM

Also, NESTLE had quite a turnout at this year’s AGM with a very supportive base of shareholders.

I’ve got videos of the fun-filled fare up on my instagram.

Understanding the Business and its Products

Nestle's Product Portfolio
Nestle’s Product Portfolio

You would’ve been living under a rock if you fail to recognise just one of these household names. The products shown here has crept into the lives of Malaysians since we were children.

Let me paint you a picture.

You’ve had Nestle Milk when you were young. You remember the Milo trucks parked at your school compound serving free cups of chocolate goodness. You somehow recall that annoying Mat Kool song cruising round your neighbourhood.

And as you got older, you went to college where you had to tighten your belt and save some money so you filled your stomach with Maggi for breakfast, lunch and dinner. You stayed up late at night studying, buzzed on Nescafe.

What’s next you say?

You get a new job at some high-flying company, what’s that coffee machine you find in your pantry? Nestle again. Your boss pays Nestle every month to keep the machines churning. You enjoyed late night outs with your friends and colleagues at the mamak. Guess what your resident Ah-ne uses in his food and drink? Nestle.

Hell, you even remember them ‘Take a Break, Take a Kit Kat’ ads! Your parents and grandparents are probably taking Nestum in the morning and Omega at night for their bones and stuff.

My point being, Nestle’s products are here to stay for the foreseeable future. And you my friend, have been lining the pockets of NESTLE shareholders since you were 5.

 

Facts and Figures

Nestle Malaysia Growth
Source: Yahoo Finance

Investor’s realized the value of NESTLE in 2018, in a huge way. The company’s stock price has almost doubled since 2017, despite their latest Milo Incident.

I do not foresee any big jumps in the share price in the near future. Neither do I see too big of a dip for the company. At the current price of RM147.90, NESTLE’s dividend yield is below 2% the mark. My dividend yield for the stock, because I bought it at an average price of RM66.88 is at 4.04%.

NESTLE has had a continuous increase in net profit since 2014. As a rule of thumb, companies offering food products like Nestle are able to keep up with inflation.

 

Dividend Growth Perspective

NESTLE has been paying dividends consistently. I’ve held the shares since 2014.

Dividend yield was at 4.56% (2015), 4.04% (2016) and 4.04% (2017). However, with the sudden surge in share price and company growth, we should see dividends increase over the coming years.

Investors shouldn’t expect this metric to go sky-high since growth in the industry is somewhat limited.

Valuation

With the recent price increase, NESTLE is trading at 53.71 P/E.

They’re currently overvalued in my opinion. With everything factored in, I would definitely wait on this stock. Dividend history isn’t there to back up a strong buy signal.

An added note, I’m sure I’ll get many comments and messages saying Nestle is ‘expensive’. Technically it is because to buy the minimum number of 100 shares, you’d have to pay RM147.90 * 100, which comes up to RM14,790 at the current price.

However, if you’re serious about investing, get serious about saving your money. NESTLE is a worthwhile investment and it has been an invaluable defensive stock in my portfolio.

 

End.

NESTLE

Bought Price – RM66.88

Current Price – RM147.90

Capital Gain – 121.14%

Total 2018 Dividends – RM410 (so far)

Dividend Yield – 3.07%

Disclosure: I hold 200 units of NESTLE shares in my Freedom Fund portfolio. At its current trading price of RM147.90, I’m up 121% on the stock.

I will continue to hold onto my Nestle stocks for now, without adding any to the portfolio.

As always, my opinions and strategies are never intended to be a buy/sell recommendation. The strategy used has worked for me and it is for you to decide if it can be implemented into your own financial plan. Always do your own research and due diligence before investing.

A list of good dividend stocks in Malaysia can be found hERE.

 

 

 

Unit Trusts & Mutual Funds vs DIY Investing

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Filed Under: Dividends, FI/RE, Financial Independence, Investment 13

F*ck the Funds, F*ck the Fees.

I’ve seen too many people investing in unit trusts, mutual funds, saving plans – whatever these fee-charging schemes call themselves. Some argue that a fund manager will earn better returns for you. Look at their overall performance. Ask the right questions, and the answers rarely justify the high fees.

Ask them some questions and it’ll all start to fall apart.
If you’re still not convinced, take a look at Warren Buffett’s 2023 bet against managed funds here.

When someone charges you a fee to manage your money, know that even a 1% fee can cost you dearly. Fees reduce the growth potential of your investments, and the effect of compounding can work against you. Fees ultimately impact your investment’s growth potential. In a huge, huge way. How huge? The following simple example will illustrate.

The Impact of Fees – The Magic of Compounding Working Against You

We have here, 3 female investors.

Consider three investors, each earning a 10% return per year on an initial RM100,000 investment in 2018. The only difference between them is the fee they pay:

  • Girl A: DIY invests on her own, with total fees of about 0.33%.
  • Girl B: Pays a 1% fee – a conservative figure for a fund.
  • Girl C: Uses a unit trust or hedge fund, paying an estimated 3% annual fee.

Now, long-term investing. Let’s have all 3 investors invest for 30 years.

Unit Trusts & Mutual Funds vs DIY Investing Dividend Magic Fees Impact 30 year

30 Years Down the Road

  • Girl A (0.33% fees): Portfolio grows to approximately RM1.6 million.
  • Girl B (1% fees): Portfolio grows to around RM1.32 million, a loss of about RM250K compared to Girl A.
  • Girl C (3% fees): Portfolio grows to roughly RM760K—a loss of about RM900K compared to Girl A.

30 years down the road, Girl A’s investment is going to be worth 2x more than her counterpart that invests at 3% fees.

Now let me show u the difference in value in 50 years. Still a reasonable time frame in my opinion.

Unit Trusts & Mutual Funds vs DIY Investing Dividend Magic Fees Impact 50 year

50 Years Down the Road

Over a 50-year period, the impact of fees becomes even more dramatic. Even a 1% fee can leave you with an investment value that is RM3 million less than if you had lower fees. For Girl C, the loss is even more staggering – she is at an RM7 million loss compared to Girl A. This example shows how fees can quickly erode your investment gains.

Girl C is probably going to be really happy if a unit trust agent tells her she will have RM3 million after 50 years IF her investments give her 10% annually. But, mention her girl friend A’s investment value of RM10 million? She’s bound to go ballistic.

How’s that for compounded interest? This time, compound interest is working AGAINST you.

Why Fees Matter

High fees act like a hidden tax on your wealth. They reduce the power of compounding, the key driver of long-term growth. Ask around—talk to your parents, uncles, or aunties about their unit trust investments. Many will tell you stories of returns that never met expectations. Now, imagine comparing that with an investment that grows free from high fees. The difference is striking.

A 1% fee could translate to a difference in the millions. Be aware of fees.

What Can You Do?

Invest on Your Own

Consider DIY Investing and managing your own investments in stocks and equities. This can save you from paying high management fees.

We’re fortunate to have local platforms like MooMoo that charge low fees and is regulated in Malaysia.
My review of MooMoo Malaysia can be found here.

Choose Low-Cost Funds

If you prefer professional management, look for funds with minimal fees. Go for international and US ETFs. You can start by taking a look at Vanguard’s VOO. Low fees and they mirror the whole S&P 500. VOO can be bought via MooMoo as well.

Ask Questions

Always inquire about fee structures and the impact on your long-term returns before you commit. As a general rule, forget all our local unit trusts and mutual funds. If you want to invest locally, DIY and invest in stocks. If you want exposure to international and US stocks, go for ETFs.

Conclusion – Say NO to Fees

Next time someone tells you that a 1% or 3% fee is acceptable, show them these figures. Or tell them about Dividend Magic. The cost of fees is not insignificant, and over decades, they can crush your returns.

Pardon my language, but I feel strongly about this. If you want to build wealth, start by keeping your fees low.
You can start by learning how to invest on your own stocks and equities hERE.

A Review of Funding Societies – P2P Lending in Malaysia

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Filed Under: Investment, Other 20

Funding Societies – Let’s Finance!

So I’ve started investing in P2P financing/loans a few months ago via Funding Societies.

I decided to wait a couple of months before having this post up as I wanted to be sure of the returns as well as the credibility of the site.

And.. So far so good!

I’ve put up RM3,000 as initial capital and, after all the fees, I’ve gotten back RM66.73. My first investment was made on 29 November 2017. This gives me an annualized gain of 13.17% per annum, outperforming my Freedom Fund.

Of course, the risks of financing are higher compared to shares. I’d advise everyone to carefully go through the various businesses’ prospectus before jumping in. And as always, higher returns will mean higher risk on your part as a financier.

 

How does Funding Societies Work?

As an investor, you’ll first have to register an account. More info on signing up below

Once your account is activated, and you’ve deposited some money into your account, you’ll be able to begin financing small businesses in Malaysia.

You’ll typically receive email notifications when investment opportunities become available. Note that you may have to wait a bit for such an opportunity.

The next step is to then decide on the amount to invest, from as little as RM100.

From experience, you can expect to receive your first repayment a month after the funds have been disbursed to the SME.

The Risks

I feel it is important to delve more into the risk part of P2P financing, especially for us as investors.

Funding Societies do themselves vet through the various SME issuers through its rigorous and rigid scorecard-based risk assessment. The tenure of financing is also relatively short (between 1 to 12 months).

Default rates are currently at around 1.5% across the countries Funding Societies operate in – Indonesia, Singapore and Malaysia. Good news though, Malaysia is, at the moment, default-free – 0%.

To further minimize your risk, I would recommend spreading your investments across different loan issuers, should anyone default. A simple example will be investing RM10,000 across 100 different deals. A 1.5% default rate will probably result in a default in 2 deals. Investors will still be able to generate returns from the remaining RM9,800.

 

Signing Up – RM50 BONUS

Signing up to be an Investor is a breeze. Just head over to Funding Societies, and all you need is your IC / passport number, an email, and your mobile number.

Additionally, you’ll receive a bonus RM50 when you sign up with my code j1mwa37p

The terms? You’ll just have to invest a collective amount of RM1,000.

Don’t worry, all the links provided here already has my code embeded.

Alternatively, you may click on this link Funding Societies.

A big thank you in advance!

Funding Societies - Sign up page
Funding Societies – Sign up page

 

Easy to Use Interface

The interface of Funding Societies has changed significantly compared to when I first joined. It is now much easier to get your annualized performance (no more calculating this on your own) and you get to view your net income, after expenses and fees easily.

Funding Societies Malaysia - Interface 1
Funding Societies Malaysia – Interface 1

 

Funding Societies Malaysia - Interface
Funding Societies Malaysia – Interface 2

 

Funding Societies Malaysia - Interface
Funding Societies Malaysia – Interface 3

Funding Societies – Conclusion

I expect great things from Funding Societies in the coming years.

Already they are the largest regional P2P financing platform in Southeast Asia, connecting creditworthy SMEs with retail, high net worth and institutional investors.

Funding Societies is recognized and regulated by Securities Commission (SC) Malaysia and has received various awards and recognition both regionally and globally, including making the prestigious Fintech 250 list and winning the Global SME Excellence Award from the United Nations’ ITU Telecom Unit.

If you’ve ever wondered what it feels like lending money to businesses as a bank does, give Funding Societies a go. The business is self-sustaining and is based on the fees they receive from your loan payments. And the returns are commendable.

 

Update (24 Nov 2018)

My investment in Funding Societies so far stands at a cool 13.12%. It’s actually doing better than my share investments.

Also, thank you, everyone, for the referrals. You’re amazing.

Preference Shares in Malaysia – ICPS, RCCPS

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Filed Under: Dividends, Cryptocurrencies, Investment, Portfolio - Freedom Fund 15

What are Preference Shares?

The first thing that comes to mind to most Malaysians when Preference Shares / Preferred Stocks are mentioned is dividends. We will expect a higher rate of dividends compared to Ordinary / Common Shares. However, apart from dividends, there exist several other key features contained in a Preference Share.

  1. If and when a company is insolvent, preference shareholders are entitled to be paid from assets of the company first, before ordinary shareholders;
  2. Most preference shares have a fixed (and higher) dividend rate; and
  3. Preference shareholders typically do not have voting rights.

Sunway Berhad’s Preference Share, ICPS

December 2020.

As a Sunway Berhad investor, I was allotted 1730 ICPS rights. I then applied for 777 more ICPS and was approved for 770.

In total, I have 2500 ICPS now. Looking forward to that 5.25% in dividends. Also, I forked out RM2,522 in total. RM22 being handling fees.

Allotment: One ICPS for every five existing Sunway shares.

Tenure: Five years

Issue Price: RM1.00 per ICPS

Conversion Price: RM1.00 per Sunway share

Conversion:

1. 50% mandatorily converted into new Sunway shares on Dec 2024.
2. Remaining balance converted on Dec 2025.

Dividend: 5.25% (maximum)

*Sunway did not fix the dividends to remain shariah compliant.

So a few details first for Sunway’s irredeemable convertible preference shares (“ICPS”).

  1. Irredeemable: ICPS holders cannot redeem and convert as they please. As per above, 50% will be converted to Sunway ordinary shares on year 4, remaining on year 5.
  2. Convertible: 1 ICPS to 1 Sunway ordinary share.

 

IGB Corporation Berhad’s Takeover by Goldis Berhad – Free Tickets to the Show

This one was back in February 2018.

A huge part of why I’m doing this introduction on Preference Shares is because I’m actually electing to receive Preference Shares in lieu of cash / ordinary shares when Goldis takes over IGB Corp (a company I’ve invested in).

So this is your ticket to actually see how a corporate takeover works and more importantly, join me as I take my first step into the world of Preference Shares.

I’ll of course, be updating this periodically.

A Brief Introduction

Goldis Berhad actually owns 73.40% of IGB Corp and a takeover has been on the books for a long time. A takeover offer can be made to other shareholders if you own more than 50% of a company. 

To make this easier to understand, I’ll be using my own shareholdings as an example. I own 4,000 shares of IGB Corp, bought at RM2.87 per share.

Take note that IGB Corp closed at RM2.97, the trading of shares has since been suspended. The shares of IGB Corp have been valued by Goldis at RM3.00 per share during the takeover exercise.

There are 3 ways for me, as an IGB Corp investor to cash out from this takeover.

  1. I receive 100% Cash (RM3.00 per share). I’ll receive RM12,000  in cash and make an instant gain of RM520 (A 4.5% gain)
  2. I receive 30% in Cash and 70% in Goldis Shares. I’ll receive RM3,600 in cash and 2,800 units of Goldis Shares which are going for RM3.10 per share as of today. (A 6.96% gain)
  3. I receive 12% in Cash and 88% in New Redeemable Convertible Cumulative Preference Shares (RCCPS). I’ll receive RM1,440 in cash and 3,219 units of new Preference Shares valued at RM3.28 each. (No gain)

As you may well have guessed, I opted for Option 3.

IGB Corp Goldis RCCPS
Option 3 – RCCPS (Don’t forget to affix your RM10 Revenue Stamp and enjoy the post office queue)

Details of the Preference Shares or RCCPS Scheme

Tenure: 7 years

Dividend Rate: 4.3% (semi-annual payment)

Redeemable: Goldis Berhad can purchase/buy back the preference shares from and including the 4th anniversary of the issue date up to the maturity of the 7-year period.

Convertible: 1 preference share can be converted to 1 ordinary share at any time during the 7-year period.

Cumulative: If and when there are any missed dividend payments, they are to be paid at a later date by Goldis. ie. it’ll be owing to preference shareholders until the tenure of 7 years.

In Summary

4.3% Dividend Rate

With the RCCPS option, I’ll receive a FIXED return of 4.3% on my 3,219 units of preference shares at RM3.28 each. That’s RM454 every year for 7 years. In contrast, Goldis Berhad’s dividend yield is less than 1% currently.

The Redemption

I will be holding onto my preference shares for a minimum of 4 years. After which, Goldis will have the option to Redeem and buy back the shares at their discretion.

This is the only part of the whole exercise that worries me as I would like to hold onto those shares for as long as I can, and at the end of it all, convert them back to ordinary Goldis Shares.

But! Historically, Goldis has not redeemed their existing RCCPS and it matures in 2020. If that’s anything to go on.

I’ll just have to keep an eye out after the 4th year for any news of redemption.

End.

I hope I’ve managed to help some of the IGB Corp investors here clear up most of the issues and queries you have regarding the whole takeover exercise.

In short, and after my analysis, the RCCPS option is the way to go. The 100% cash option is the worst, so please don’t go that route. If you want cash, go for Option 2, and sell your Goldis shares after.

If you’ve got any other questions regarding this or if I’ve made any mistakes (I’m a 100% new to this), please do get in touch in the comment section below or on Facebook.

Thank you for reading and enjoy them Preference Shares!