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15-10-2015, 10:57 AM
(13-10-2015, 09:33 PM)SincereKen Wrote:(13-10-2015, 12:39 PM)butcher Wrote:(13-10-2015, 09:18 AM)SincereKen Wrote: Indeed, the bond can be appiled thru atm & quite attractive. One may hedge Fed's Interest rate issue against Perennial's bond - same asset class but different value play.
It too acts as cushion against reit's impending decline. 3-year bond is short; 2K for private & 250K for accredited bond investors.
Hi SincereKen,
I am also interested in the bonds.
By the way, how are US Fed interest hedged against the bond?
Hi Butcher,
Perennial invested in Real Estate & US Fed interest raise may cost Singapore's Interest Rate (Pegged to US Interest Rate) to rise. The spillover effect is that interest expense/payable from (Leveraged/Gearing) Loan to increase. Reit investors may too find new opportunities instead of this stock.
2 (Direct) Negative Impacts; Potential Reduction in Earnings per share & Decline in Stock/Reit price.
If reit investors still find fundamentals strong, why not lock-in a 3-year bond - a form of corporate loan - to hedge against the aforementioned factors. Bond payment provides fixed coupon rates & maturity par value at the end.
Hope this helps.
Warm Regards.
Disclaimer: DYDD & Above is my opinions, not to be constituted as advice.
Hi SincereKen,
As PRHL is a reverse takeover, no audited financial statemenst publicly available yet, so made my assumptions as follows (no offence):-
1. Assuming if the loans in PRHL are floating with LIBOR as a reference, the increase in LIBOR USD rate will increase financing cost.
2. Your assumption of Singapore Interest Rates increase in conjunction with US rates, I would opine not entirely correlated. SIBOR have already increased quite some time ago while US rates still stayed put.
3. REITs & Bonds are different asset classes. If interest rates increases, bond prices fall. There is no hedge, you suffer an unrealised capital loss theoritically unless hold till maturity.
