At the current price of S$0.90, we estimate the expected annualized return for SIA’s MCBs to be 7.47%. In our view, this is fairly priced. Overall, we were surprised to find no mispricing, despite the low trading liquidity and added complexity around the instrument. Nonetheless, we will be paying close attention in
...For readers keen to find out if SIA shares are worth buying now, feel free to read our earlier article published 28 September 2020: “If SIA’s profits returned to pre-Covid levels tomorrow, is it a “BUY” at today’s price?” Difficulty: Nightmare 1) Mandatory Convertible Bond (MCB): Two possible outcomes 2) At S$0.90, what’s the expected return of the MCBs? 3) What’s the minimum return a rational investor should require? Appendix 1: Valuing the components of the MCB individually Appendix 2: What if a 2nd tranche of MCBs is issued? The InvestQuest’s View
