Turners (TNR) bonds

[Beagle]

Thanks Snoopy, really appreciate your analysis. Terms unattractive for this mutt too. If the shares pay 16.5 cps in fully imputed dividends this year (16.5 / 0.72) = 22.92 cps gross that's a 7.85% gross dividend yield at $2.92, significantly better than the 5.5% offered by the bonds.

Of course if the shares keep performing like a mange and flea infested pig dog the shareholders might have wished they were bondholders.

[Snoopy]

Personally the lower interest rate return, loss of the conversion option and the fact that the dividend yield on the head shares is now a good match for the fixed interest yield has put me off these bonds. It looks to me like buying the bonds retains the downside risk of the shares if the business goes sour but gives up any upside risk that a holding in the head shares will give you. To me, the head shares are now the more balanced risk investment option.

Thanks Snoopy, really appreciate your analysis. Terms unattractive for this mutt too. If the shares pay 16.5 cps in fully imputed dividends this year (16.5 / 0.72) = 22.92 cps gross that's a 7.85% gross dividend yield at $2.92, significantly better than the 5.5% offered by the bonds.

Of course if the shares keep performing like a mange and flea infested pig dog the shareholders might have wished they were bondholders.

Almost a year on Beagle and the only statement of sense we made without the benefit of hindsight is your 'pig dog' behaviour and consequences that came to pass.

Total dividends from the head shares were ahead of your expectation at 17cps. But the share price on Friday was down to $2.33. So we are talking about an historical gross yield of:

17/ (233 x 0.72) = 10.1%

Meanwhile the TRA100 bonds last traded on a yield of just 4%. That would be a capital gain for original bondholders of:

5.5/4 = 37.5%

Talk about backing the wrong horse! Congratulations to the original TRA100 bondholders, although good luck with cashing out your profits. The market liquidity for those bonds looks microscopic.

I can't make the numbers add up as a buyer at 4% though. You would be buying the $1 face value bonds for $1.375. Then even if you bought early enough to pocket all three annual interest payments your total income in two and a bit years would be just:

5.5c + 5.5c + 5.5c = 16.5c (gross), or 11.88c (net)

Yet the capital you would lose on the bonds when they are redeemed in two years time would be 37.5c on every dollar. So it looks like those buying the bonds at a 4% yield are guaranteed to lose a net 25.5c on each and every bond they hold bought at that price. What am I missing?

SNOOPY

[Snow Leopard]

...What am I missing?...

TRA100-20190825.jpg

Buy $100 face value of bonds for $103.862 (see piccy above).

Receive 9 quarterly payments of $1.375, a gain of $12.375

Receive $100 back on redemption, a loss of $3.862

Net gain over two and bit years = $8.51

Which is approximately 4.0% on your outlay.

[Snoopy]

Buy $100 face value of bonds for $103.862 (see piccy above).

Receive 9 quarterly payments of $1.375, a gain of $12.375

Receive $100 back on redemption, a loss of $3.862

Net gain over two and bit years = $8.51

Which is approximately 4.0% on your outlay.

Ah thank you my white furred friend. 'Well spotted' (pun intended) ;-)

So that 4% yield figure quoted, actually represents a 'wash up' calculation with all bond payments to maturity taken into account. I see now.

SNOOPY