• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Dividend Magic

Saving and Investing towards Financial Independence in Malaysia

  • Facebook
  • Instagram
  • Twitter
  • YouTube
  • HomeMain Page
  • Start HereHow to Start Investing
    • Start Here – Read this First
    • Stock Investing Guide
    • REITs
    • Stock Brokers Comparison
    • US and International Stock Broker Comparison
    • Best Dividend Stocks
    • Dividend and Growth Investing
    • Start Investing
  • Investment PortfoliosThe Freedom Fund & more
    • Freedom Fund
    • US Portfolio
    • Crypto Portfolio
      • Luno Portfolio
      • Binance Portfolio
    • StashAway
    • P2P Lending -CapBay
    • Real Estate Portfolio
    • Dividend Magic’s Yearly Review
    • Dividend Income Updates
      • Dividend Income Update 2023
      • Dividend Income Update 2022
      • Dividend Income Update 2021
      • Dividend Income Update 2020
      • Dividend Income Update 2019
      • Dividend Income Update 2018
      • Dividend Income Update 2017
      • Dividend Income Update 2016
      • Dividend Income Update 2015
      • Dividend Income Update 2014
  • Personal FinanceFI/RE & Savings
    • FI/RE Guide
    • Is the First RM100K the Hardest?
    • My Portfolio is Built on Frugality
    • Passive Income
    • Emergency Fund Guide
    • The Seven Stages of Financial Independence
    • Basic Financial Plan for Malaysians
  • About MeMe, the Website and more
    • About Me
    • Dividend Magic Recommends
    • Hire Me

Goldis

Preference Shares in Malaysia – ICPS, RCCPS

By Leigh
Updated December 27, 2020 Filed Under: Cryptocurrencies, Dividends, Investment, Portfolio - Freedom Fund 15

IGB Corp Goldis RCCPS

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.

View this post on Instagram

A post shared by DIVIDEND MAGIC (@dividendmagic)

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!

Share this:

  • Click to share on Facebook (Opens in new window)
  • Click to share on Twitter (Opens in new window)
  • Click to share on Reddit (Opens in new window)
  • Click to email a link to a friend (Opens in new window)
  • Click to share on WhatsApp (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)

Primary Sidebar

Learn Investing

Join my mailing list to get a FREE basic financial plan, as well as notifications of new posts when they are published.

Learn Investing

Join my mailing list to get a FREE basic financial plan, as well as notifications of new posts when they are published.

  • Advertise & Hire Me
  • Disclosure & Privacy Policy
  • Disclaimer

Copyright © 2023 Dividend Magic

 

Loading Comments...