This is not a buy recommendation. But rather another investment option to consider.
San Miguel Corp (PSE: SMC) got SEC approval last week to start its follow-on offering of preferred shares.
Over the weekend, the subscription banner in COL Financial has already been posted with offer period until market closing tomorrow, Mar15.
In Jan2016, SMC Board announced that it shall offer PHP80B worth of preferred shares in the next 3 years (shelf registration). The initial tranche of public offering is worth PHP30B, to be listed in PSE by March 30, 2016.
Finally, with the SEC approval, retail investors and the public can partake in this investment alternative with relatively lower risk but relatively higher returns. The series 2 preferred shares shall be named 2-G, 2-H and 2-I with the following terms:
2-G: Dividend of 6.5793% per annum, SMC option to redeem by year 3
2-H: Dividend of 6.3222% per annum, SMC option to redeem by year 5
2-I: Dividend of 6.3355% per annum, SMC option to redeem by year 7
Proceeds of the share sale shall be used to refinance SMC’s dollar denominated debts (as the dollar has been rising vs peso) and to invest in its existing businesses (any of the following: SMC Global Power, Vega Telecoms, San Miguel Holding and San Miguel Properties).
If SMC is unable to redeem on the optional redemption dates, dividend rates are adjustable depending on prevailing market rates by then, plus a 3% per annum premium.
At above quoted rates, this definitely beats your time deposit returns. Not risk free though, risk is if SMC files for bankruptcy, preferred shareholders are not the first in line post-liquidation of assets. Lenders will definitely be first, then preferred shareholders, followed by common shareholders.
It is also preferred in a sense that holders are the first to get dividends, before common shareholders get theirs. And in case SMC decides not to declare dividends for the fiscal year, dividends to preferred shareholders will just accumulate until such time that SMC declares dividends once again.
So if you like SMC’s future financial prospects and looking for another investment alternative better than time deposit and less risky than common stocks and UITF, suggest you consider this. Caveat emptor.
Minimum investment via COL Financial is PHP37,500. If Juan fails to subscribe for this batch, watch-out for the next rounds of offerings in the next 3 years. Other companies also offer these kinds of shares.
Inquire with underwriting banks below, or via your online brokers if you have:
ING Bank (Manila branch)
PNB Capital and Investment
SB Capital Investment
Standard Chartered Bank
United Coconut Planters Bank
Photo from San Miguel website. Offer details from COL Financial and PSE Edge.