Too Greedy about Yield : Hyflux 6% CPS
Yes, this has been one of the hottest topics recently “ Hyflux applies for court supervision to re-organize liabilities, businesses “ ( here ). Thousands of investors will be affected by this sudden collapsed of Hyflux, yes, including Me. Nobody knows how things will turn out eventually under this so-called “ debt’s restructuring “ but I think for sure it is not good for ordinary or preference shareholders who’s typically rank lower in term of debt’s seniority as compared to secured bank loans. Hundreds of millions of bond and perps securities holders will also be affected.
In anticipating for the worst, I will need to write off $114,675.44 from my books as I am holding 1270 units of their 6% CPS.
Total cost = $117,816.81 - $3141.37 ( interest received on 25th April)
Enough of warning has been given by analysts, bloggers on the problems of Hyflux in servicing their loans ( including bonds/ perps / CPS ) due to the company’s inability to generate enough cash flow to pay for the interest. Therefore, we shouldn’t blame anyone except our self in ending up with such losses.
Yes, too greedy about the “ yield “ and bias of “overconfidence “ in hoping that they will be able to divest part of their asset to redeem the CPS once that been done. A series of “ confirmation biases “ caused me to just filtering the news/reports which I wanted to hear in believing that the company’s ability to redeem the CPS eventually.
Why didn’t you “cut loss “ when the price of 6%CPS drops to around $70? Yes, this is the problem of “ loss aversion “, it’s too painful to cut loss and we always end up in “ denial “ stage with self- illusion that hoping “ things is going to be alright “ …
But that’s not ‘Right “ at all as we should always remember that “ Stocks are Stories, Bonds are Mathematics “ ( here ), from mathematical points of view , it’s not difficult to see the RISK in buying those bond with such huge “discounted price “ and double digits yield.
|image credit to investopedian.com|
Again, it is our own fault by trying to analyze the bond with “Stories “ instead of “Mathematics “.
Hope this will be really a good lesson learned for me and all the bondholders out there…
Well, that’s life and no difference in the world of investing, not everything going to be smooth, there is always a “ hiccup “ from time to time and something to learn…..