KPG - Kiwi Property Group Limited

[Grimy]

Bond set at 2.85% minimum.
So. 2.85% most probably

[Habits]

Bond set at 2.85% minimum.
So. 2.85% most probably

Those for whom yield is impt should buy the shares and benefit from the falling bond rate. Others who want capital return will buy the bond regardless

[LaserEyeKiwi]

Some good news here, the proceeds of this green bond will mostly go towards the maturing KPG010 bond in August, which currently has a 6.15% interest rate.

so dropping ~3.3% of interest on $125 million of debt, good for a $4 million saving per year in debt interest cost.

(although someone might want to correct me given I have no idea how the interest rate derivative positions would impact this)

[winner69]

Every man and his dog wanted KPG Bonds

So $150m at 2.85%

[Bjauck]

Every man and his dog wanted KPG Bonds

So $150m at 2.85%

A lot more than the interest paid on a term deposit. After tax it may just come ahead of the Consumer inflation rate - at the moment anyway.

[winner69]

Bonds or shares?

When the KPG 6.15% 7 year bonds were issued in August 2014 the KPG share price was $1.17. Today it is $1.185

If the share price is still $1.185 on 20/8 then over 7 years capital gain is $0.005. In that period dividends have totaled $0.431 - giving a total return over 7 years of 4.72% pa from the shares

Compared to the bonds of 6.15% pa

Interesting eh

Just as well these days are different eh because you'd hope you would get more than 2.8% pa return from holding KPG shares for the next 7 years

Probably highlights how 'undervalued' KPG shares are today

[Beagle]

Some good news here, the proceeds of this green bond will mostly go towards the maturing KPG010 bond in August, which currently has a 6.15% interest rate.

so dropping ~3.3% of interest on $125 million of debt, good for a $4 million saving per year in debt interest cost.

(although someone might want to correct me given I have no idea how the interest rate derivative positions would impact this)

Easy enough to predict and they would have estimated this this when they came up with this years surprisingly low forecast of not less than 5.3 cps. Some very hard questions need to be asked about what is their plan to get dividends back to pre covid level's of 6.95 cps.

[Beagle]

Some good news here, the proceeds of this green bond will mostly go towards the maturing KPG010 bond in August, which currently has a 6.15% interest rate.

so dropping ~3.3% of interest on $125 million of debt, good for a $4 million saving per year in debt interest cost.

(although someone might want to correct me given I have no idea how the interest rate derivative positions would impact this)

Easy enough to predict and they would have estimated this cost saving when they came up with this years surprisingly low dividend forecast of ~ 5.3 cps. Some very hard questions need to be asked about what is their plan to get dividends back to pre covid level's of 6.95 cps. Listening into the last call I gathered the impression they really are not focused on this. Just sweep the problem regional malls under the carpet by selling them and build some new stuff and hope everything works out okay.

[winner69]

Shares v Bonds

Now is only one point in time but investing in KPG shares over the last few years has been a disaster compared to investing in their bonds

Table below shows the current KPG bonds on issue (shaded) and the returns (capital plus dividends) from the shares if one had bought on the date the bonds were issued. One column at current share price and the right hand column is if the share price was $1.50 today

In 3 cases there's been negative returns from the shares - that's not good is it. A reflection of KPG management maybe?

If one ascribes to the theory that returns from shares should be more than bonds than the KPG share price would have to be about $1.50 now.

Interesting and weird stuff eh

Hope future returns from shares in future beat the current 2.8% bond rate

As said earlier probably reflects how 'undervalued' KPG shares appear to be - and generally there is a reason for such undervaluation - what's the market telling us at the moment? Appears to be a complete lack of confidence in their strategy going forward and in particular doubting management's ability to execute that strategy

Now its stopped raining must go and cut the grass

[Beagle]

"

Now is only one point in time but investing in KPG shares over the last few years has been a disaster compared to investing in their bonds Winner69"

Perhaps more to the point investing in KPG over the last five years (and my biggest concern is this has happened when capitalization rates have fallen dramatically which is normally consistent with strongly rising share prices and NTA) has been a complete unmitigated disaster compared to any other form of property investment as the following comparative detail illustrates.

Share price 5 years ago - share price now, percentage change
ARG 114, 169 up 48%
GMT 132, 244 up 85%
VHP 214, 331 up 55%
PCT 125, 170 up 36%
PFI 160, 293 up 83%
KPG 153, 119 down 23%

Not a recent phenomenon either. As previously posted the share price of KPG was $1.18 on 31 March 1994, more than 27 years ago !

People invest for many reasons but a common theme with property investment is people generally invest hoping to get yield and capital gains. I don't think KPG's business model works other than for those investing just for yield.