Hybrid Securities question?

[Bill M]

Hi everyone this is my first post. In the last year I have become more interested in hybrid securities as a source of income. I hold regular ASX listed stocks but branched out into these as a better source of income rather that of online interest bearing accounts.

Last month the Bank of Queensland and the Goodman Group both raised cash through IPO's and the circumstances of these Hybrid Stocks are pretty much the same.

One is BOQPC and the other is GMPPA. Both have a 5 year reset date, they pay 2% and 1.9% respectively rate above the 90 day Bank Bill rate but there prices are way different.

BOQPC closed at $102.80 and GMPPA closed at $95.50 today. Both have a face value of $100.

Can anybody explain why 2 such similar stocks have such huge variations in prices? I just can't work it out? Cheers.

 

[prawn_86]

Admittedly i know very little about Bills, Notes etc.

But is the pay date of the 2 securities different? As this could affect the market price.

Other things affecting Bills include the rating of the company (AAA, BBB etc), company profile/risk

That is about all the basic knowledge i contain in this area

 

[Bill M]

Hi prawn_86, the differences are that BOQPC pay fully franked dividends every 6 Months. GMPPA pay unfranked dividends every 3 Months. The underlining interest rate is the same, all BOQPC do is give you imputation credits, GMPPA just pay you the whole lot up front.

Both have exactly the same Moodys and Standard and Poor rating, this is another reason why the price difference puzzles me.

To me GMPPA seems the better stock but the price difference is dramatically diffferent, still can't work that out, any ideas?

 

[ricee007]

Hi prawn_86, the differences are that BOQPC pay fully franked dividends every 6 Months. GMPPA pay unfranked dividends every 3 Months. The underlining interest rate is the same, all BOQPC do is give you imputation credits, GMPPA just pay you the whole lot up front.

Both have exactly the same Moodys and Standard and Poor rating, this is another reason why the price difference puzzles me.

To me GMPPA seems the better stock but the price difference is dramatically diffferent, still can't work that out, any ideas?

I'm very late to the party here, but, I somehow bumped into this thread, so I may as well answer for anyone else who does...

Whats more likely to go bankrupt / be unable to pay dividends? A large bank like BOQ, or a real estate trust concerned with property investments and taking on debt?

For the record, GMPPA are $65.20 at the moment, where as BOQPC are $93.30...... this is because of risk.

For those wanting to know more about hybrids:
http://ozbankers.com/index.php?option=com_content&task=view&id=30&Itemid=29
"What exactly are “hybrids”, and why do I care? "

May be useful...

EDIT:->I just figured out how, it was from the 'similar threads' box at the bottom of the page of another thread.

 

[Calliope]

The grossed up dividend rate for TELYS4 (SVWPA) for the next six months will be 10%. At the present price of $89.10, this equates to a yield of 11.22%.

The present float of Healthscope Notes paying a dividend of 11-11.25% looks an attractive proposition, but they may be hard to come by.

 

[Gringotts Bank]

100% franked by the looks of things. (SVWPA).

Missed the ex date unfortunately.

 

[Bill M]

The grossed up dividend rate for TELYS4 (SVWPA) for the next six months will be 10%. At the present price of $89.10, this equates to a yield of 11.22%.

I hold these and got my first dividend drop today on the new TELYS 4 rate. A nice tidy little earner this one, very happy.

 

[Bill M]

Hi prawn_86, the differences are that BOQPC pay fully franked dividends every 6 Months. GMPPA pay unfranked dividends every 3 Months. The underlining interest rate is the same, all BOQPC do is give you imputation credits, GMPPA just pay you the whole lot up front.

Both have exactly the same Moodys and Standard and Poor rating, this is another reason why the price difference puzzles me.

To me GMPPA seems the better stock but the price difference is dramatically different, still can't work that out, any ideas?

Almost 3 years since I posted that. I ended up selling BOQPC for $102 per share way back and made a small profit. GMPPA I still hold and added 40 more when the price hit $49. During the GFC they crashed to $9 and I held on. Today I still hold the lot and they are around $78. They never missed an interest payment so I am happy with that. In the 3 years that have passed I have learned a lot of valuable lessons about these types of stocks.

 

[McLovin]

Almost 3 years since I posted that. I ended up selling BOQPC for $102 per share way back and made a small profit. GMPPA I still hold and added 40 more when the price hit $49. During the GFC they crashed to $9 and I held on. Today I still hold the lot and they are around $78. They never missed an interest payment so I am happy with that. In the 3 years that have passed I have learned a lot of valuable lessons about these types of stocks.

What do you think the chances of these being redeemed at the step-up date next March is? If they are redeemed then they're on YTM of ~20%. There does seem to be enough room on the BS to redeem. Not sure what to make of it and the return isn't that great, that I'd want to be speculating on the redemption question.

Sorry, this question is of course only directed at you Bill, if you still hold the hybrids.

 

[Bill M]

What do you think the chances of these being redeemed at the step-up date next March is? If they are redeemed then they're on YTM of ~20%. There does seem to be enough room on the BS to redeem. Not sure what to make of it and the return isn't that great, that I'd want to be speculating on the redemption question.

Sorry, this question is of course only directed at you Bill, if you still hold the hybrids.

Good question McLovin. In the last 3 Months there has been speculation that Goodman Group will repurchase the hybrids next March and this has led to the rather rapid price increase. I held a bit too many for my comfort zone so I sold half at around $85. I just didn't want too much of it and there was plenty of other stuff out there equally as good if not better.

If they don't repurchase then the spread jumps another percentage point, from 1.9% to 2.9%. The way I figure it for myself is that all is good and well if they repurchase and if they don't I am happy to collect the dividends. I wouldn't be betting the house on a repurchase though, but it could happen. It's a 50/50 bet for me, hope that helps.