The Boy who Procrastinates (TBWP): Investment

Introducing a Virtual Assistant for SG Stock Queries

By The Boy Who Procrastinates - April 16, 2021

In order to keep myself updated on the financial information of SGX listed companies, I used to install a plethora of investment applications on my mobile device, such as Bloomberg and Yahoo Finance to name a few.

However, it can get a little messy, often painting an incomplete picture when the information that I was searching for exists in bits and pieces from various sources.

And that was the decisive moment that I thought of consolidating the data and building a one-stop virtual assistant to process financial information regarding Singapore stocks/bonds.

With Telegram gaining popularity and prominence as a messaging service application, it would appear to be the ideal platform to experiment a bot that churns out financial information on the go.

And with that comes the birth of SGStocksBot.

Getting access to SGStocksBot

To get started, you would need to have Telegram installed on your mobile device. Upon setting up a Telegram account, you can access to SGStocksBot via the search function,

or the following Telegram invite link: https://t.me/SGStocksBot

You will be directed to the following page in which you may click on "Start" to initiate the bot.

/start Command

For those who are unfamiliar with the use of Telegram bots, a bot command begins with a slash "/" followed by the supported commands.

One of the universal commands is "/start" which initiates the conversation with the bot. At the same time, it brings up the menu of the commands available to the user. Let's go through these commands together.

/info Command

The info command gives the basic information of the stock / bond. To use this command, you can key in "/info" along with the name or stock code of the stock / bond that you wish to look up.

To demonstrate using DBS stock, you can key in either "/info DBS" or "/info D05" if you have knowledge of the ticker symbol that you are searching for.

Other than stocks, you may also search the database for other security types such as ETFs and bonds.

/div Command

The div command provides information regarding the current dividend yield as well as the dividend history of a particular security for the past 5 years.

The current dividend yield is calculated based on the current price of the security and the amount of dividends issued in the previous year.

To use this command, you can key in "/div" along with the stock code of the security that you wish to look up. As the bot does not impose case sensitivity on the query, you may input the stock symbol in either uppercase or lowercase letters.

Do note that only the info command allows name searching of securities. So you may wish to check up on the ticker symbol using the info command.

To demonstrate using DBS stock, you can key in "/div D05" to obtain the dividend information of DBS.

/divsum Command

The divsum command calculates the amount of dividend that a shareholder would have collected in a defined time period based on the number of shares that he/she has owned in that particular security.

To use this command, you can key in "/divsum" along with the stock code of the security, the start and end years (inclusive) that you wish to define and the number of shares owned.

To demonstrate using DBS stock, you can key in "/divsum D05, 2011, 2016, 1000" to derive the total amount of dividend collected with 1000 shares of DBS stock from 2011 to 2016.

From the example below, the user is able to tell that he has collected a total of $3,460 dividend based on his 1000 shares of DBS from 2011 to 2016. Additionally, he is able to view the dividend breakdown over the years.

Using this command, the user is able to observe the track record of dividend payments for a particular security over the years.

/updiv Command

The updiv command allows the user to view the upcoming dividend / corporate actions for SGX listed companies.

To use this command, you can simply key in "/updiv". The bot will respond with 5 upcoming dividend payouts, ordered by recent corporate actions.

/divrank Command

The divrank command calculates the dividend yields for each security in specific categories and rank them accordingly.

The dividend yield is calculated based on the previous day's closing price of the security and the amount of dividends issued in the previous year.

To use this command, you can simply key in "/divrank". The bot will respond and ask for your input of choice for the category.

Upon receiving the user's input of choice, the bot will calculate the dividend yields and rank them accordingly. Here are some examples for blue chip stocks and REITs.

I had initially intended to generate the ranking using the price at time of query as input variables but this has hampered the execution of the command considerably. Therefore, I have switched to the use of previous day's closing price of the security in order to optimize the bot's performance.

One thing to take note is that dividend yield of a security is inversely related to its share price. Basing an investment decision solely on high dividends and ignoring other factors can have its implication and risk.

For instance, First Reit has announced a rights issue in Dec 2020 to meet its debt covenants and avoid an imminent default. This has resulted in the hammering of its stock price.

Hence, investors should not be lured by the attractiveness of high dividend yields. It is imperative to understand, inter alia, the financial metrics of the company and the sustainability of the high dividend payout.

That is not to say that all high-yield securities signify beleaguered companies in financial duress. The necessary due diligence should be carried out before committing to an investment.

/news Command

The news command allows the user to view the recent Singapore financial news and industry trends.

To use this command, you can simply key in "/news". The bot will respond with the 5 pieces of financial articles, ordered by the publication date.

/trend Command

The trend command computes the relevant metrics for trend analysis of a security in the given lookback period. This aspect caters to the technical minds who are keen in studying the trendlines and price movement of stocks.

To use this command, you can key in "/trend" along with the stock code of the security and the number of years as lookback period.

To demonstrate using DBS stock, you can key in "/trend D05, 10" to analyze the trend data for DBS over the past 10 years.

The mean refers to the average daily stock price for the defined period (i.e. 10 years in this case). Visually, you can imagine a horizontal line cutting across the chart at 16.06.

On top of that, users are able to create their own linear regression charts for trend analysis.

The stock trend line refers to a linear regression line (or line of best fit) drawn through the daily stock price data. Users are able to use the long-term trend line as a gauge to determine the valuation of the security at the current price (ie. if a stock is trading above or below the regression trendline).

The inclusion of 4 standard deviation lines serves as additional metrics to quantify the degree of deviation from the main regression trendline. For example, the stock price of DBS has reached 1 standard deviation above the trendline in 2018 and fallen below 1 standard deviation from the trendline in 2016 and 2020.

The price data for these 5 metrics represent the latest price points at the end of the chart.

Naturally, this command offers an over-simplistic approach in determining the valuation of a particular security. Exercising the appropriate due diligence is definitely recommended.

/support Command

Last but not least, if you have found SGStocksBot to be useful and would like to show your appreciation, the support command allows the user to contribute and help support the running of the bot via PayLah payment link.

One last thing to note is that the bot will idle and go to sleep after 30 minutes of inactivity. So do expect the bot to take a few seconds to respond to your command if it has been more than 30 minutes since your last interaction with it. Other than that, the bot should respond almost instantaneously.

If time permits, I may roll out additional bot features/commands in the future. In the meantime, I hope you enjoy the bot and please let me know of any feedback that I can improve on it.

If you do not wish to miss out on any articles, you may consider following the facebook page for timely update.

Disclaimer: Kindly note that the content is published for general information purpose only. The information presented should not be used or construed as an offer to sell, a solicitation of an offer to buy, a recommendation for any security mentioned or as professional financial investment advice.

3 Comments

Investment

[P2P] Statistical Review of Funding Societies After 100 Completed Loans

By The Boy Who Procrastinates - May 11, 2019

At the time when robo-advisory is making its way into mainstream investing, Singapore has witnessed a burgeoning peer-to-peer ("P2P") lending industry which opens up a myriad of opportunities for investors eyeing an alternative income stream.

Ever since the launch of Singapore's first P2P campaign in 2014, the concept of P2P financing has taken its roots over the years, contributing to a rising trend of fintech startups vying for a slice of the pie in the crowdfunding space.

In this article, I will be sharing my experience and statistics after completing 100 loans with one of the P2P platform operators — Funding Societies ("FS").

What is P2P Lending Platform?

To put it simply, P2P lending platforms, acting as intermediaries, facilitate financing between borrowers and lenders.

Lenders, in this scenario, refer to retail investors like you and me. For investors, P2P lending can present itself as an alternative asset class on their portfolios with low minimum investment requirement and potentially high returns.

Borrowers, on the other hand, are mainly small and medium-sized enterprises ("SME") seeking funds for business needs. Compared to traditional banking system, the P2P lending platforms offer quicker loan approval and funding process, allowing business to capitalise on short-term business opportunities. Furthermore, some of these SME may not have the collateral or credit standing necessary for the eligibility of a bank loan.

Currently, there are more than 10 such platforms on the market. Under the Securities and Futures Act, platforms that raise funds from the public through P2P lending are required to hold Capital Market Services licenses by the MAS.

Type of Loans

At this stage, FS offers 4 different types of loan to borrowers for various needs:

Business Term Loan: Unsecured loan products that are mainly requested by SME to expand their businesses, as well as for the purpose of project financing. Tenure can range between 1 to 12 months.

Invoice Financing: A form of short-term borrowing where SME sell their accounts receivable or invoices to improve their working capital. Unlike term loans which are unsecured, the invoice acts as collateral for invoice financing. Shorter loan tenure, generally range between 1 to 4 months.

Property-backed Secured Loan: Loans taken by SME which have pledged local properties as collaterals. Longer loan tenure mostly at 12 months.

Revolving Credit Facility ("RCF"): Allows borrowers to take multiple loans as long as it is within the tenure period and up to a pre-approved limit. RCF tenure can be up to 12 months.

In the risk reward paradigm, invested money can provide higher profits only if the investor is willing to accept a higher possibility of losses. Therefore, it follows that the expectation of returns should commensurate with the level of perceived risk by an investor.

For example, the property-backed secured loan generally offers a lower interest rate as these loans are backed by assets which reduce the associated risk.

Conducting Due Diligence

As with any other investment, performing the necessary due diligence is of paramount importance before committing your money to it. This is especially so given that P2P lending is widely considered to be a risky investment product largely due to the inherent credit risk associated.

Even though FS does not consistently disclose the identity of the borrower, a loan factsheet will invariably be provided before the commencement of the funding process. The document contains the necessary details of the loan, such as the repayment schedule, summary of the borrower and its financial condition. These details allow investors to understand the borrowers' financial health and to carry out informed investment decision for each loan accordingly.

As a creature of habit, I have recorded the pertinent details for each loan periodically. This helps to provide an overview of my progress thus far and allows me to tally the amount of fund available in the FS account.

Started dabbling in P2P lending in Nov 2017, I have observed some interesting statistics with the accumulation of data since and would like to share it for the benefits of other investors.

Type of Loans Invested

The 100 completed loans were split almost evenly into term loan and invoice financing with the balance tilt slightly in favour of latter at 57%.

Invoice financing is generally considered to be less risky for investors as compared to term loan. This is because borrowers have delivered the goods/services to their customers and are expected to be receiving payments. The unpaid invoices in this scenario, are being used as collateral for financing.

Parenthetically, I have observed that majority of the investment opportunities exist in the form of either term loan or invoice financing, with only a handful of property-backed secured loans being available once in a while. I have not come across RCF at this stage as it is a relatively new product.

Amount Invested

One of the merits offered by P2P lending platforms is the low barrier to entry for investors to crowdfund loans. For certain loans, FS allows a minimum investment quantum of $20 which provides investors better diversification of their P2P portfolios.

(Click to enlarge)

As illustrated, the amount that I have invested in a single loan ranges from $20 to $4,000. Majority of the investment were taken up in amounts of $50, $100, $500 and $1,000, which were commonly observed as maximum investment limits for most loans.

The aggregate sum invested in these 100 loans is computed to be $40,860, far exceeding the initial fund that I have set aside. This is because the repayment received with each completed loan can be re-invested in another new loan.

Loan Duration

(Click to enlarge)

The tenures of the loans offered typically range between 1 to 12 months. However, most of the loans that I have chosen to invest in are skewed towards relatively short-term ones, as shown in the above graph.

19% and 35% of the completed loans have tenures of 30 days and 45 days respectively. At the other end of the spectrum, only 5% of the completed loans have tenures of 12 months.

The rationale of the strategy employed is to recover the principal and interest early, so as to increase my participation rate in more upcoming loans. But of course there is no ideal approach as each individual has different preference and game plan.

Service Fees

There is no free lunch in this world. As an online platform that matches curated borrowers with investors, FS charges a nominal service fee of 18% of interest earned. The fee structure adopted by FS, distributes the service fee across each loan repayment. That is to say, service fees are only deducted when there is repayment of interest to the investors.

(Click to enlarge)

From the graph, one may observe a conspicuous step-up in the service fees incurred. This is chiefly due to the increment of service fee from 15% to 18% of interest earned with effect from Feb 2018. FS has explained that the fee hike is due to the inclusion of the prevailing GST imposed by IRAS.

Another eye-catching piece of the graph is probably the outlier of 0% service fee in Nov 2017. The fee for that particular loan was waived to incentivise investors to participate in the crowdfunding for a big loan.

The general trend of the service fees see-saws slightly but remains close to 15% or 18% of interest earned.

Returns

Many investors may be incentivised to participate in P2P lending due to its potentially high returns. If we were to take into consideration of the service fees incurred, will the yield still be as attractive as publicised? Let's find out.

(Click to enlarge)

Graphically, one of the striking features is probably the numerous spike in returns for some loans. Based on the data collected, my understanding is that the late and early interest received by investors are not subjected to service fees, hence boosting the returns that an investor may receive.

If we were to readjust the chart frame and pay no attention to the aforementioned outliers, the returns from the loans generally fluctuates between the 5% to 10% markers.

For sake of clarity, the rate of returns is simply calculated using the following equation:

To get a typical value from the set of data, the simple average of the returns is determined to be 11.87%.

However, this may not be an accurate measure since the invested amount for each loan varies. As an alternative, we may consider assigning weights (ie. invested amount) to the return values and compute the weighted average.

For the 100 completed loans, the weighted average of the returns is calculated to be 9.81%. Subsequent to the increment of service fee in Feb 2018, the weighted average of the returns has been reduced to 9.14%.

Relationship between Loan Duration and Returns

(Click to enlarge)

With the availability of data, we may try our hands in examining the relationship between 2 variables — Loan Duration and Returns. This may help to provide insight into how the length of the loan duration may affect the amount of interest earned.

Delving into the above scatter plot, we may observe that there is a greater degree of statistical dispersion in terms of returns for loans with shorter duration as compared to its counterparts. However, investing in loans with longer tenure does not appear to be reaping significantly greater returns.

Computing the weighted average return for each duration variable produces the following table:

(Click to enlarge)

Discounting the weighted average return for loans with tenure of 1 month, the longer-term loans tend to be yielding slightly higher returns than loans with tenure of 1.5 to 3 months. The sweet spot seems to be directing towards loans with duration of either 1 or 4 months.

Relationship between Type of Loan Investment and Returns

Another interesting variable to plot a graph with is probably the type of loan investment. Will there be a notable difference in returns if we were to invest in invoice financing or term loan?

(Click to enlarge)

Examining the boxplot diagram, we can see that the length of the boxplot and whiskers for Invoice Financing appears to be slightly longer than that for Term Loan. This indicates that there is greater variance in the returns for Invoice Financing.

Invoice Financing has a slightly lower median as compared to Term Loan, implying that 50% of the returns are greater than 9.7% for Invoicing Financing whereas 50% of the returns are greater than 10.2% for Term Loan.

In terms of mean (marked by the cross), Invoice Financing has a higher average returns at 12.38% than that of Term Loan at 11.20%.

One may deduce that investing in Invoice Financing may yield less consistent returns but it comes with higher average returns, albeit not a significant difference. Overall, there does not appear to be discernible difference between the 2 types of loan investment in terms of returns.

However, statistics should probably be taken with a pinch of salt. Personally, I do not think that 100 is a large enough sample size to paint an accurate picture. Moreover, there are a slew of factors that may affect the returns such as different creditworthiness of borrowers, late interest incurred and my preference towards shorter term loans.

Rate of Default

In the context of P2P lending, defaulting occurs when a borrower has failed to repay on a loan. However, I understand that there are varying definitions of default rates amongst P2P lending platforms and the regulatory body.

For example, MAS states that a loan is defaulted if it is 30 days past due or in default, whichever is earlier.

FS, on the other hand, defines default by product types:

Invoice Financing: 60 days past due
Business Term Loan: 90 days past due

Personally, I am not perturbed by late repayments, just as long as the principal and interest are repaid by borrowers eventually. For the sake of my own data collection, I would regard a defaulted loan as one that is not repaid completely, either in terms of principal or interest.

In this sample of 100 completed loans, I have encountered one default case (1%). Fortunately, the borrower has defaulted on late interest payment only and the recovery of the principal was unaffected. Regardless, I have marked it as a defaulted loan due to the incomplete repayment.

Paying tax on P2P interest

It is widely known that dividends derived from stocks/bonds investment are not taxed at personal level in Singapore. However, this is not the case for interest earned from P2P lending.

According to IRAS, the interest income collected from loans to companies, are subjected to progressive tax rates for resident taxpayers, determined by the income bracket in a given year.

To put it simply, the net interest that an individual can earn from P2P lending has to be deducted from the following items:

Service Fee of 18%
Tax rate (varies with personal income bracket)

Say if we take the benchmark of the 2018 median gross monthly income of Singaporeans and PR at $4,437 (inclusive of employers' CPF contribution) as reported by MOM, that will put us at the tax bracket of 7%.

With the tax rate of 7%, the weighted average after-tax returns from P2P investment will be reduced from 9.81% to 9.12%.

Closing Thought

Frankly, I would consider a net return of 9.12% per annum to be hardly adequate to compensate for the inherent high risk nature of P2P lending.

While investors may put in effort in conducting the due diligence and understand the financial health of borrowers before committing their funds to it, there are numerous associated factors that may cast a shroud of uncertainty over the P2P lending industry.

Furthermore, unlike investment in stocks and bonds, I do not fancy the idea of tax payable from interest income eating into the returns from P2P lending.

In any case, it is likely that I may cease my investment in the domain of P2P lending after the investment in loans with longer tenures have come to fruition.

I will probably write on this again when I have gathered more data with each completed loans.

If you do not wish to miss out on any articles, you may consider following the facebook page for timely update.

Disclaimer: Kindly note that this is not a sponsored post. The author is in no way affiliated with the stated crowdfunding platform (other than being an investor) and does not receive any form of remuneration for this post. The Boy who Procrastinates has compiled the information for his own reference, with the hope that it will benefit others as well.

6 Comments

Investment

Decision Tree on the General Offer for M1

By The Boy Who Procrastinates - February 13, 2019

Amidst the Lunar New Year festivities, the past few weeks could potentially be momentous for many M1 shareholders. This emanates from the ongoing voluntary general offer for M1 which will be closing on 18 Feb 2019.

Having vested in M1 myself, I too am in a quandary over whether to accept the offer or not. You see, I have purchased it when i first started out learning the art of investing as a beginner. It was in 2015 when it was priced steeply above $3 per share. But I will probably save the tale of woe for another time.

In this current predicament, we can grouse about the perceived unfair offer price or we can play the hand that we have been dealt. In this article, I will focus on the latter and lay out the decision tree on the course of actions that is available for the minority shareholders.

Update as of 19 Mar 2019

Following the closure of the Offer, Konnectivity has annouced that the total number of shares owned or agreed to be acquired by Konnectivity represent 94.55% of M1. With that, Konnectivity intends to compulsorily acquire the shares of the shareholders who have not accepted the Offer. The trading of M1 shares has been suspended.

Update as of 27 Feb 2019

Further acceptances have been accepted, resulting in the Konnectivity controlling 90.15% in M1. As there is now less than 10% of the total number of issued shares of M1 held by the public, the free float requirement will not be fulfilled. Therefore, M1 will be delisted from SGX after the offer closes.

The closing date of the offer has thus been extended from 4 Mar to 18 Mar.

Update as of 26 Feb 2019

For shareholders who have accepted the offer before it becomes unconditional, they should have received the sales proceed on 26 Feb. It will be credited directly to the designated bank account.

Update as of 15 Feb 2019

It is announced that Axiata has accepted the voluntary general offer made by Konnectivity for its entire stake in M1.

M1 has also released a statement to declare that the Offer has become unconditional with the total number of shares owned or agreed to be acquired by Konnectivity representing 76.35% of M1.

The closing date of the offer has thus been extended from 18 Feb to 4 Mar.

For shareholders who have accepted the Offer before the announcement, they will receive the payment within 7 business days (by 26 Feb). For those who have yet to accept but would like to do so, will receive the payment within 7 business days after the Konnectivity has received their acceptance.

Currently, Konnectivty has yet to achieve the revised compulsory acquisition threshold of 93.33% but has reached the majority approval threshold of 75% in the event of a delisting resolution.

Based on the information available, I feel that the recent move by Axiata might spur higher acceptance rate among minority shareholders who have yet to reach a decision, which might amplify the possibility of a delisting scenario.

Offer

On 27 Sept 2018, Keppel Corporation Limited and Singapore Press Holdings Limited has made a voluntary general offer to acquire the remaining stakes in M1. It is carried out via Konnectivity Pte Ltd ("Konnectivity"), a joint venture company majority held by Keppel.

The Offer Price for each M1 share is at $2.06. In order for the Offer to turn unconditional, Konnectivity should be holding more than 50% of M1 Shares (minimally 50% + 1 share) by the end of the Offer period.

Pursuant to Rule 28.1 of the Singapore Code on Take-overs and Mergers, Konnectivity is required to announce and inform SGX on the following day after the offer becomes unconditional.

Given that there has not been announcement of such nature by Konnectivity (other than the mandatory declaration of valid acceptance on 22 Jan when it has extended the closing offer date), I would think it is safe to assume that the 50% threshold has yet to be satisfied.

Intention of Konnectivity

According to the Offer Document, the stated intention of Konnectivity is to gain majority control of M1. Konnectivity will, following the close of Offer, conduct a review of M1's operation with the aim of implementing strategic and operational changes to allow M1 to compete more effectively in the telecommunication sector.

As such, the majority control obtained by Konnectivity will allow it to facilitate the business transformation of M1.

Current M1 Shareholders

According to the 2017 Annual Report, the top 3 substantial shareholders of M1 (as of 22 Feb 2018) are as follows:

Prior to the start of the general offer, Konnectivity has an aggregate interest of 33.32% in M1. As of 22 January 2019, Konnectivity has announced that it has received acceptance of 1.05% of the total shares. This brought the total amount of shares owned by Konnectivity to 34.35%.

Therefore, Konnectivity needs only to acquire an additional 15.65% of the total number of shares in order to reach the 50% threshold. Apparently, Axiata is holding the trump card in this offer.

Contrary to general expectation at the outset of the Offer, I would think it is unlikely that Axiata will mount a counteroffer at the eleventh hour, with just less than a week left to make a decision.

Compulsory Acquisition

In the event that Konnectivity has received valid acceptance or has acquired shares that totalled to 93.33% or more of the total number of M1 issued shares (90% of the shares that Konnectivity does not own at the date of offer), Konnectivity has stated that it intends to exercise its right (under Section 215, Companies Act) to compulsorily procure the remaining unacquired shares on the same offer term. This will ultimately result in the delisting of M1 from SGX.

If Konnectivity has failed to acquire the sufficient number of M1 shares to compulsorily acquire the remaining M1 shares, Konnectivity may request M1 to apply to SGX to be delisted provided that:

delisting resolution is approved by a majority of at least 75% of the total number of issued shares and
delisting resolution is not voted against by 10% or more of the total number of issued shares

In a similar fashion, Axiata has a pivotal role if the scenario of a delisting resolution plays out.

Free Float Requirement

Pursuant to Rule 723 of the Listing Manual, there should be at least 10% of the total number of issued shares of a listed company held by the public at all time. If the percentage of the total number of M1 shares held in public hands fall below 10%, SGX may suspend the trading of M1 shares at the close of the Offer.

Under the Listing Manual, "public" in this case refers to, among other things, persons other than substantial shareholders (ownership of 5% or more of the voting shares of M1), hence effectively excluding Axiata by the definition.

In the event that the free float requirement has not been met, Konnectivity has stated that it does not intend to preserve the listing status of M1. However, under such situation, Konnectivity may not be able to compulsorily procure the remaining unacquired shares if the compulsory acquisition threshold of 93.33% is not achieved.

To put it simply, if Axiata does not tender all its shares (28.69% interest) in acceptance of the Offer and there is less than 10% of M1 shares held by shareholders who are members of the public, the trading of M1 shares will remain suspended.

To ensure that shareholders do not have to hold suspended shares for an indefinite period, Konnectivity has obtained a conditional confirmation for waiver of aforementioned conditions to the delisting resolution from SGX in the event that M1 does not meet the free float requirement. In such circumstances, Konnectivity will offer cash exit alternative on the same terms as the Offer to the remaining shareholder, which may eventually lead to the delisting of M1.

Decision Tree on the General Offer for M1

With all the information presented above, we can now delve into the decision tree on the general offer.

(click to enlarge)

It might appear a little intricate at first glance, but fret not. The subsequent sections will break down the branches of the decision tree.

M1 shareholders can choose to either accept the offer by completing the Relevant Acceptance Form or not accept the offer.

Alternatively, shareholders can also choose to sell their shares on the open market and lock in at the prevailing price. At the time of writing, M1 is currently priced at $2.04 per share.

I would think that this is probably due to pessimism surrounding the conditionality of the Offer and some may choose to seal the deal, albeit at a price lower than the Offer price.

Nevertheless, selling it on open market can justifiably be considered a more straightforward option at this stage. The difference is insignificant at $0.02 per share (excluding transaction fee) and it offers a higher degree of certainty than participating in the Offer.

Accept the Offer

If the shareholder has decided to accept the offer, there are 3 possible scenarios that could play out, depending on the amount of shareholding interest owned by Konnectivity by the close of Offer:

Konnectivity owns less than or equal to 50% of M1 issued shares

Should the Offer fail to become unconditional, it is likely to be business as usual for M1 and its shareholders. Konnectivity will not be able to gain majority control of M1. The relevant number of Offer shares will be returned to the shareholder's CDP account no later than 14 days from the lapse of the Offer.

Previously, Axiata, Keppel and SPH have ended their strategic review on the divestment of their stakes in the telco without reaching a consensus in July 2017. Following the news, M1 stock has fallen approximately 9%.

In my opinion, the share price of M1 is likely to fall back to the price level prior to the general offer, if not more.

Konnectivity owns more than 50% but less than 93.33% of M1 issued shares

If Konnectivity owns more than 50% of M1 shares by the close of Offer, the Offer will become unconditional. As such, the shareholder will receive the payment within 7 business days.

Having achieved majority control of M1, Keppel and SPH will likely to proceed with their stated intention of facilitating the business transformation of M1. It is anyone's guess as to how successful M1 will turn out to be under the management of Keppel and SPH.

However, I would anticipate the share price of M1 to fall below $2 in the short term. This could be attributed to the mediocre 2018 financial results, as well as the increasingly competitive landscape of the telco industry.

Alternatively, Konnectivity may request M1 to apply to SGX to be delisted. But this would depend on how likely it is to attain approval of at least 75% of the issued shares. For example, if Axiata does not accept the Offer, the delisting of M1 will be highly improbable.

Konnectivity owns more than or equal to 93.33% of M1 issued shares

In such scenario, Konnectivity has intended to exercise its right to compulsorily procure the unacquired shares and proceed to delist M1 from the local bourse.

Similarly, the shareholder will receive the payment within 7 business days after the Offer becomes unconditional.

Does not Accept the Offer

If the shareholder has decided not to accept the offer, there are also 3 possible scenarios that could play out, depending on the amount of shareholding interest owned by Konnectivity by the close of Offer:

Konnectivity owns less than or equal to 50% of M1 issued shares

Similarly, it is probable to be business as usual for M1 and its shareholders. With less than or equal to 50% of shares, Konnectivity will be unable to gain majority control of M1.

In my opinion, the share price of M1 is likely to fall back to price level prior to the general offer, if not more.

Konnectivity owns more than 50% but less than 93.33% of M1 issued shares

If Konnectivity has achieved majority control of M1, Keppel and SPH will likely to proceed with their stated intention of facilitating the business transformation of M1.

Alternatively, Konnectivity may request M1 to apply to SGX to be delisted which may hinge upon the result of the general offer.

Konnectivity owns more than or equal to 93.33% of M1 issued shares

In such scenario, Konnectivity has intended to exercise its right to compulsorily procure the unacquired shares and proceed to delist M1 from the local bourse.

Even if the shareholder has not accepted the offer at the onset, he has to relinquish his shareholding on the same offer term.

Closing Thought

For the past few months, M1 has been trading narrowly between the range of $2.04 to $2.12. And it is evident that the share price is being propped up by the offer price. If this price support is to be removed, M1 share price is likely to sink further.

Personally, I think it is unlikely that Konnectivity will be able to obtain 93.33% or more ownership of M1 shares. There could probably be an equally likely chance of Konnectivity owning less than or more than 50% by the close of Offer. I would presume that most might take a side towards the end of Offer period while waiting to see if Axiata is making any move.

With the increasingly competitive landscape of the telecommunication industry, worsened by the establishment of low-cost mobile virtual network operators, it is challenging to operate in the current saturated market.

It would appear that the industry model is no longer the secured oligopoly as it once was. The pricing pressure aggravated by the incoming TPG Telecom, as well as the rising adoption of the cheaper SIM-only plans have posed a double whammy to the underlying revenue of existing telco.

To be frank, I am not sanguine on the outlook of telco industry at this stage. Furthermore, I imagine that M1 share is likely to trend downward regardless of the outcome of the general offer. Having said that, I would consider either selling it on open market or completing the Relevant Acceptance Form.

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Disclaimer: Kindly note that this is not a sponsored post. The author is in no way affiliated with the stated entities (other than being an investor of M1) and does not receive any form of remuneration for this post. The Boy who Procrastinates has compiled the information for his own reference, with the hope that it will benefit others as well.

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[P2P] Statistical Review of Funding Societies After 100 Completed Loans

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Paying tax on P2P interest

Closing Thought

Decision Tree on the General Offer for M1

Update as of 19 Mar 2019

Update as of 27 Feb 2019

Update as of 26 Feb 2019

Update as of 15 Feb 2019

Offer

Intention of Konnectivity

Current M1 Shareholders

Compulsory Acquisition

Free Float Requirement

Decision Tree on the General Offer for M1

Accept the Offer

Does not Accept the Offer

Closing Thought

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