ALI VOTING PREFERRED SHARES -- good buy ?

[quark001]

I saw this in my COL Account. I do have several ALI shares, but i'm not sure if this is a good buy? (1:1 Pre-emptive Rights Offering @ Php 0.10/share)

Not sure as well how am I going to make money on this


VOTING PREFERRED SHARES FEATURES:
a)
Dividend rate is equal to the 90% of the 10-yr PDST-R2 as of the time of issue, payable annually on anniversary date, repriced every 10 years thereafter at 90% of the 10-year PDST-R2 prevailing on each relevant 10th year anniversary of Issue Date
b)
Non-cumulative and non-participating in payment of dividends
c)
Convertible to 1 common share per each voting preferred share commencing on the 10th year after issue date
d)
Preferred in liquidation to the extent of par value
e)
Voting
f)
No pre-emptive rights to any issue of shares, common, preferred or voting preferred
g)
Redeemable at par at the sole option of the Company

[KuyaDanny]

Will these shares be listed? How many shares are you entitled to buy? If it's less than a board lot don't even bother.

[quark001]

Hi kuya Danny, I'm entitled to about 19,000 shares. Is that sufficient ?

Additional info:

IMPORTANT:
a)
Shares will not be listed in the PSE
b)
Shares will be requested in certificate form and issued to the shareholder for custody and will not appear in your COL stock portfolio (as it won’t be a listed security)
c)
When ready your certificates may be claimed at Ayala Land’s Transfer Agent
d)
The availability date, issuance fees and procedure for claiming certificates will be announced later once the details are provided by the transfer office

[KuyaDanny]

Forget it, man. If they are not listed then the only way to get your money back is by a private sale or a redemption (at the sole option of the company).

The estimated dividend after taxes on your prospective P1,900.00 investment will be P83.00 a year for the next 10 years. Not a big deal.

I think ALI has a ready buyer for all of these shares and they are only being offered to existing shareholders to comply with the law.

[quark001]

Hi Kuya Danny, how about c)Convertible to 1 common share per each voting preferred share commencing on the 10th year after issue date, does it mean after 10 years, will the VOTING PREFERRED SHARES be converted to Common shares which can is listed?

[KuyaDanny]

Yes. Did they say at what price you can convert? If it's not fixed now, it's usually the market price of the common shares at the time of conversion.

If you really want to own listed common shares, buying these preferred is not always the best way to get there. You can buy the common shares today and be done with it.

[Power-mad]

If you really want to own listed common shares, buying these preferred is not always the best way to get there. You can buy the common shares today and be done with it.

Enough said, thanks for the insight.

I fell for it by the way--somehow the words "preferred," "voting," and "non-listed" have some cachet to them. Although they are being sold at a substantial discount (0.1000 per share) if that's any consolation.

Oh well, hindsight, as they say, is 20/20.

I'm just curious as to how something like this affects the (expected) dividends and value of the common listed stock.

[KuyaDanny]

The effect on common stock dividends can be calculated.

The proceeds of this entire preferred share issue will be used to redeem outstanding preferred shares which are nonvoting. The outstanding shares have a dividend rate of 4.64% per annum. The new preferred shared will have a dividend rate of 90% of 10-year PDST R2 (which was 5.4% last time I looked), or 4.86% per annum. There is a net increase in preferred dividends of 0.22% per annum.

This translates into P28.67 million per annum added dividends to preferred. Another way of putting it is P28.67 million per annum in dividends which are not available to the common shareholders. If you divide this number by the amount of common shares outstanding (13,043,160,000), you will get 0.219 CENTAVOS per share potential reduction in annual common stock dividends. It is not a significant amount in my opinion.

[exp101t]

mathematics... my head is starting to crack

[Anne_Auditor]

Hi Kuya Danny,
I don't know much about stock market, but I can understand the nature of Common and Preferred shares.. And I would like to invest my savings on stocks but I would like to study how it runs... Can you recommend a website wherein I can have a good view of the market... and how to know when to buy and when to sell... thanks

[KuyaDanny]

You can start by making your presence felt in three stock investing threads - in our very own PEx:

http://www.pinoyexchange.com/forums/...d.php?t=198768
http://www.pinoyexchange.com/forums/...ad.php?t=10343
http://www.pinoyexchange.com/forums/...d.php?t=513622

There are more and you will find them if you visit this forum regularly.

There are also many other websites which are good for your purpose, but I will not name them here. They compete with PEx for our readership, and I will not do them a favor by giving them free endorsements. They don't mention PEx in their websites, so I will be fair and not mention their websites in PEx. I hope you understand.

[Power-mad]

The effect on common stock dividends can be calculated.

The proceeds of this entire preferred share issue will be used to redeem outstanding preferred shares which are nonvoting. The outstanding shares have a dividend rate of 4.64% per annum. The new preferred shared will have a dividend rate of 90% of 10-year PDST R2 (which was 5.4% last time I looked), or 4.86% per annum. There is a net increase in preferred dividends of 0.22% per annum.

This translates into P28.67 million per annum added dividends to preferred. Another way of putting it is P28.67 million per annum in dividends which are not available to the common shareholders. If you divide this number by the amount of common shares outstanding (13,043,160,000), you will get 0.219 CENTAVOS per share potential reduction in annual common stock dividends. It is not a significant amount in my opinion.

Thanks Kuya Danny although I have a feeling it'll take more than a dozen re-readings to finally wrap my head around it. I was reading this in the office, staring intently at the screen for a good 10 minutes until I noticed my boss throwing dagger looks my way. To be fair, reading anything that has an avatar of a bespectacled bunny could not be work-related.

Citisec is also offering BDO stock rights which is a totally different animal if I am not mistaken:

Please be informed that the Board of Directors of the Exchange approved the application of BDO Unibank, Inc. (“BDO” or the “Bank”) for the additional listing of 895,220,348 common shares (the “Rights Shares”) with a par value of P10.00 per share, to cover its 1:3 Stock Rights Offering (“SRO”) to all stockholders of record as of June 14, 2012 at an Offer Price of Php48.60 per share.

[KuyaDanny]

BDO stock rights are a better deal and I wholeheartedly recommend subscribing to them.

[quark001]

salamat kuya danny sa inputs

[jmen07]

Hi kuya Danny, I can't find more information about those BDO stock rights. How can I subscribe to this and can you please give more info regarding this one?

[KuyaDanny]

The stock rights were not available to everyone. They were offered to people like Power-mad who owned BDO common stock as of a certain date (June 14, I think).

[Power-mad]

The ex-date (don't look at me, I've never heard this word or portmanteau or whatever you call it before, ever) was June 8th. I've bought more BDO common shares since then but, sadly, it's no longer included in the computation for the stock entitlements.

The main take-away? I've realized my holdings of BDO is paltry (compared to, say, SM) which is certainly NOT what I wanted. I was really only buying the minimum board lot every month--in my own version of peso cost averaging-- when I should have been buying more. Had I done that I could have had more stocks by now and be entitled to more stock rights subsequently.