# Bond Idea : LippoMalls 7% Perp, 5.7% YTC, Supercharge yield 9 to 12%

• Denomination : S\$250,000
• Maturity : Perpetual
• Callable on 27 Sep 2021 and every 6 months thereafter at par
• Coupon Reset (on 27 Sep 2021 and every 5 years thereafter) : 5Y SGD Swap offer rate (now 1.8%) + 5.245%
• Current price : 104.0 / 104.7 (commission of 0.25% is embedded in the price)
• YTC (at 104.7) : 5.7%

It is also possible to supercharge LippoMalls 7% perp to give higher returns. I shall share 2 scenarios:

1. Fund \$85,000 and finance the remainder at 2.3%
2. Fund \$125,000 and finance the remainder at 2.3%

1. Fund \$85,000 and finance the remainder at borrow at 2.3%

• Value of bond purchased = \$250,000 x 104.7% = \$261,750
• Annual coupons received =  \$250k x 7% = \$17,500
• Annual finance fees paid = (261,750-85,000) x 2.3% = \$4065
• Annual profit = \$17,500 – \$4,065 = \$13,435
• Capital loss in 2021 if called = \$261,750 – \$250,000 = \$11,750
• Amortize this loss over 4.3 years = \$11,750/4.3 = \$2,732
• Annual profit after capital loss = \$13,435 – \$2,732 = \$10,703
• Annual net yield = 10,703/85,000 = 12.5%

2. Fund \$125,000 and finance the remainder at borrow at 2.3%

• Value of bond purchased = \$250,000 x 104.7% = \$261,750
• Annual coupons received =  \$250k x 7% = \$17,500
• Annual finance fees paid = (261,750-125,000) x 2.3% = \$3,145
• Annual profit = \$17,500 – \$3,145 = \$14,355
• Capital loss in 2021 if called = \$261,750 – \$250,000 = \$11,750
• Amortize this loss over 4.3 years = \$11,750/4.3 = \$2,732
• Annual profit after capital loss = \$14,355 – \$2,732 = \$11,623
• Annual net yield = 11,623/125,000 = 9.3%

What returns are you looking at for your investments? Is 9 to 12 % annually good enough for you? If you would like to know more about how to supercharge bonds, sign up for my next bonds introduction class http://sb1.eventbrite.sg

• I'm a remisier with Maybank Kim Eng, and as a bonds and REITs investor myself, I guide my clients to build resilient bonds and REITs portfolios. If you like to be guided, please contact me regarding how to become my client; It's free!