Astrea Retail Bond – It’s a Press!

 

3 Reasons to press for the bond

1)      Current Astrea Bonds Trading at a Yield to Maturity less than 3%

As such, the 3% bond should be traded at a premium and should open above $1. Which means anyone who wishes to punt should not be underwater on day 1.

 

2)      Current Retail Bonds are also trading below 3% yield to maturity

The best comparison would be to compare with the SIA Retail bonds. Surprisingly for a company that continues to be unprofitable, it is trading at a yield to maturity that is below the ASTLC 3.85%. Although one can argue that its maturity its in 2024 and therefore have a shorter timeframe, the ASTLC 3.85% also has a Scheduled Call Date of 20 June 2024. As such should it be called in 2024 when it meets the conditions. The XIRR of 2.89% without counting any fees looks attractive as well.

 

3)       PE Funds perform well under simulation and from March 2020 to November 2020

A previous doubt I have in the private equity would be the performance and whether they would do well to generate profits for redemption. From the simulation by an independent research consultant, it seems to have done well by maturity date. Which means that the bonds are safe (not risk free but relatively lesser risk)

From the results, we can conclude that the covid 19 crisis did not affect profits of the PE Funds a lot as they manage to bounce back and regain the losses by turning in a profit that is way higher than the loss in the 6 months from March 2020. As such, passing such the hurdle of Covid-19 with flying colors is a big plus.

 

             However, what are the risk?

 

1)      Interest Rate Risk - If interest rate continue to increase, bonds would have a fall in price in general and would encourage funds to invest in other newer issues with higher rates.

2)      Stonks Risk – Well in the environment where a day’s fluctuations can be very wild, one would never know what happens in these few days. Assuming someone took the money to punt the Astrea Bonds instead of deploying them in Tesla or other more in-demand and in-focus stocks which they might have wanted. They might miss out on those gains instead.

3)      Freak Events – There can be many freak events that might happen out of the blue. For example, PE Funds found to be fraudulent etc. Should such shock freak events occur, this would likely drive down valuations of the PE funds and the bond as well.

 

Conclusion: It is a press! At least for the short run its worth the try. For the long run, the prediction of interest rates is anyone’s guess. A fair value opening price i guess should be 1.014.

Pictures obtained from Bondsupermarket and Bond Prospectus

Disclaimer: This is a post written in a short time span and of the blog owner’s view. As such it should not be a surprise should any mistakes arise in the post. It is also a post sponsored solely by the owner's own time.