Dividend Magic

Saving and Investing towards Financial Independence in Malaysia

Portfolio - Freedom Fund

My Portfolio is Built on Frugality

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Filed Under: Financial Independence, Frugal, Portfolio - Freedom Fund 23

The Freedom Fund – A Product of Good Offense and Defense

I’ve been asked often about how I managed to amass an RM400K (almost RM500K) portfolio at 30. This post isn’t about showing off and flaunting my portfolio, so I hope it doesn’t come off that way.

I can narrow it down to two basic parts – Offense and Defense.

The first and most obvious is your ability to generate income and returns – your offense. With a high income, be it from your day job, side hustles, a business, or from your investments, a good offense is directly proportional to your increase in wealth.

However, based on my experience, a good and solid defense is perhaps much more important than your income. A solid defense is equivalent to having a high savings rate and being frugal.

Let me start off by saying that playing good defense and being frugal isn’t for everyone. I am not telling you to follow and copy what I do to the letter, but this is how I was brought up and how I built my Freedom Fund.

My Childhood / Youth

I’d like to think that my childhood and good early parenting helped make me the person I am today.

I am from a middle-class family. We’ve had our fair share of ups and downs. We’ve never gone hungry or without a meal but food was never EVER wasted.

I got RM10 per week from my mum during primary school. Thus, the first lesson in budgeting was born. If I spent all RM10 on Monday on nasi lemak and french fries, I’d starve for the week during recess. Even at that young age, I managed to save some money every week. That money was then used to buy stuff like erasers for that eraser flipping game.

Fast forward a few years, high school was pretty much the same. I had a bump in allowance of course but I was still saving money every week. I recall looking on enviously at my friends who all had iPods. I had to save money for a year before getting my own. That feeling of achievement at the end though, was worth it.

University – One of the biggest regrets I have to this day is that I didn’t take the time to apply for scholarships after my SPM. I surprisingly got really good results but no one taught me about scholarships.

I had the opportunity to study abroad as well with my parents offering to fund my studies in Australia. Instead, I completed my education locally to save my family money.

Back then, I was fortunate enough that my parents were able to pay for my education. However, I took out a PTPTN loan anyway as the interests were lower than FD rates. It was a no brainer for me. I took my parent’s money for my education and placed them in FDs. And after 3 years of education, guess what? PTPTN was giving out a 20% discount for those who settled their loans early. At the age of 21, I had made a 20%+ return. This was to be my seed money.

Another thing that helped fund my portfolio initially was that I took a part time job when I was studying. The money was one thing but it helped built character and a sense of gratefulness when I eventually entered the workforce full time. So parents, even if your teenage child doesn’t need to get that part time job, I think you should make them work anyway.

Entering the Workforce

In the first week of entering the workforce, I followed my seniors and colleagues around. We mainly ate in the mall costing me RM15 – RM25 per meal. This was when I was on an RM2,800 salary. Thankfully, I smartened up pretty quickly and my staple food was economy rice – chap fan.

I had breakfast at a nearby kopitiam – eggs, toast and coffee for around RM5. Lunch was economy rice which cost me around RM10 or if I’m feeling rich, RM13. I had my dinners at home. This was my life for 4 years. Of course there were times when I splurged occasionally. Birthday meals, dates, the usual.

During this time, if memory serves, I had a savings rate of around 50%. This was when I started buying stocks. I spent the day at work and in my free time, I analyzed stocks. Sunway, Nestle and Scientex were my very first stocks and I still hold them to this day.

Being Frugal Today

A Penny Saved is a Penny Earned

Today, as you can tell from some of my posts on social media, I do splurge a little on food and travel. But let me assure you, every other day I am still in essence a frugal person.

I still play good defense and it is in my nature to be frugal. I still go for that economy rice (now RM15) when my friends and colleagues go for lunch at the nearby bistro.

I still turn off the lights and appliances when I leave the room. I even do it when I’m not in my own house / property.

I still do not turn on the tap to the maximum when washing the dishes.

I make sure to have a fan in my room and office so I don’t turn have to turn on the air conditioning. And at times when I am hot and I have to, I set it to 24°C. That’s the lowest I’ll ever go.

I practice most hacks on frugality like waiting a week before making a big purchase. I pay myself first when I get my salary. I buy in bulk whenever I can. And I love credit cards for their cashback and points.

All these might seem a little extreme to you, but this is how I live. It isn’t tiresome for me (it might be for the people around me), but I believe these are good habits to have. And all these, in a huge way has helped me immensely in wealth creation.

Because a penny saved is a penny earned, a penny earned is a penny invested and compounded.

A few of the stuff I use to save, earn points etc can be found hERE.

Despite everything I’ve laid out, remember to treat yourself to that occasional good meal, to travel and experience the world once you’ve built up your portfolio. Use your dividends and passive income for some leisure. Just remember to flip that light switch off before heading for that holiday.

End.

Both defense and offense are equally important on the road to financial independence. With my savings and frugality, I wouldn’t have much of a portfolio if I did not invest my money. So remember to always invest. And invest for the long term.

I apologize if you came here looking for tips on how to invest and how to pick stocks and build wealth. But the truth is, with me at least, it was discipline and good solid defense.

It’s a boring route and definitely not for everyone. So please do not feel bad about yourself if you are a big spender. Your huge income capabilities could very well outweigh your bad defense.

It is however my intention and wish that perhaps after reading this, you just might turn off that switch when you leave the room.

Do not confuse frugality with being cheap.

Onwards and upwards!

For the next article of the FI/RE and Savings Series, check out article 003 – Passive Income in Malaysia.

Funding Societies – Risks, Defaults and Diversification

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Filed Under: Financial Independence, Investment, Other Investments, Portfolio - Freedom Fund 8

Funding Societies Malaysia

This will be an update to my earlier post on Funding Societies, Malaysia’s (largest?) P2P platform.

As I have posted and shown earlier, my investments in Funding Societies has netted me an annualised return of 13.12%. As of today, it has increased slightly to 13.15%.

The referral bonus from you guys does not affect that 13.15% return. 

To put the returns into perspective, my IRR and average return for the Freedom Fund is at the 12% mark for the past few years.

 

Calculating Simple and Effective Interest Rate

Funding Societies Effective Interest Rate
Simple vs Effective Interest Rate

 

From the example, interest returns of RM10,000 for an RM100,000 investment opportunity (effective investment exposure of RM55,000) gives you an effective return as high as 18% (RM10,000 / RM55000).

The monthly repayments help reduce your risk exposure every month while increasing your investment returns. Best of all, if you choose to reinvest the monthly repayments you receive, you’ll compound and achieve even higher returns.

The folks at Funding Societies have a handy explanation for simple vs effective interest rates. The effective interest rate comes in handy when you want to compare your investments vs other choices in the market.

Default and Diversification

Most of you are worried about the risk involved when lending your hard-earned money to businesses you know almost nothing about. And you should be.

However, you’d be happy to know that the regional default rate as of November 2018 is at 1.02%.  Regional meaning Malaysia, Indonesia and Singapore.

Even more good news, the default rate in Malaysia is 3 out of 300 loans. That is 1.0%. With that kind of risk and return rates, I hope you’ll be able to make a more informed decision.

I do expect the default rate to increase in the near future as more businesses seek funding through the P2P network. As for me personally, I’ve yet to have a loan default in my portfolio.

Defaults are normal in the P2P lending industry so the key to success for us as investors is to DIVERSIFY.  The loans from Funding Societies give your returns anywhere from 10% to 16%.

I personally use the Auto Investment Bot provided by Funding Societies Malaysia.

I set my parameters as follows:

  • RM300;
  • A minimum investment period of 1 month;
  • A maximum investment period of 24 months;
  • At least 12% simple interest rate; and
  • At most 18% simple interest rate.

Signing Up – RM50 BONUS

Signing up to be invest 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.

End.

I’ve been using Funding Societies for close to a year now and that 13.15% return is real. If you’re able to stomach that minuscule default rate they have right now, I think this would make a good investment alternative.

Again, thank you, everyone, for using my code upon registration.

I’ve gotten messages of concern from many of you advising against posting my referral bonus. But my aim is to always be as transparent as I can. I’m not recommending P2P for the referral fees.

Tenaga Nasional Berhad (TENAGA) – Our Electrical Giant

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Filed Under: Best Dividend Stocks in Malaysia, Dividends, Investment, Portfolio - Freedom Fund 0

Tenaga Nasional Berhad (TENAGA 5347)

TENAGA is the largest player in generating and providing electricity in Malaysia. I would argue to the point of being monopolistic.

They’re diversified geographically through equity ownership in the UK, Turkey, Saudi Arabia, Kuwait, India an Indonesia and Pakistan.

The company’s profits are tied heavily to foreign currency exchange rates, coal and gas prices.

The Numbers

TENAGA 2017 Financial Summary 5 Year
TENAGA 2017 Financial Summary

Increasing Profits Every Year

The electrical giant has been generating increasing revenue and profits consistently for 6 years now. One of the key criteria when I pick a stock to purchase.

With increasing profits comes increasing dividends for me as a shareholder.

Increasing Shareholder Equity Every Year

For 6 years now, TENAGA has consistently increased its Shareholder Equity also known as Net Assets annually. This is another huge check mark in Tenaga’s favor. 

We as shareholders will want a company that is constantly increasing its net assets. More assets mean more ways of generating income and also increase in stock prices.

Borrowings and Gearing

Total borrowings has increased to RM38.8 billion in 2017 with the gearing at 40.3%. An increase in borrowings is only worrying when the revenue decreases.

I do hope to see the gearing reduce to below the 40% mark in the future though.

Dividend Growth Perspective

TENAGA is a huge company, generating megawatts in electricity and dividends to its shareholders.

With the increasing profits every year, I’m not worried about the company delivering proportionally increasing dividends every year.

Valuation

At the time of writing, TENAGA is trading at RM13.980, at a P/E of 11.49.

The company is a little undervalued at the moment. I’ll continue to monitor the stock and purchase more when it drops below the RM13 mark again.

 

End.

TENAGA
Bought Price – RM14.12
Current Price – RM13.98
Capital Gain – (-0.99%)
Total 2018 Dividends – RM516,80
Dividend Yield – 3.66%

Disclosure: I hold 1,000 units of TENAGA shares in my Freedom Fund portfolio.

I will continue to hold onto TENAGA and look out for buying opportunities.

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.

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.

https://youtu.be/tA_zVU5GbCQ

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!

Preference Shares in Malaysia – ICPS, RCCPS

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Filed Under: Cryptocurrencies, Dividends, 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!