Introduction
Sun Hung Kai Properties Limited (SHKP) is an international property and infrastructure group in Hong Kong. It is one of the largest and most successful real estate ownership companies in the world. The company has developed some of the iconic locations and buildings in Hong Kong, including the International Financial Center and The Peak Tower. As a listed company on the Hong Kong stock exchange, SHKP has recently launched its exchangeable bond program, allowing investors to exchange their existing stocks for new SHKP stocks without leaving the stock exchange.
What are Exchangeable Bonds?
Exchangeable bonds are debt instruments issued by a corporation and are backed by that corporations assets. The bondholder exchanges the bond for shares of another company as specified in the terms of the bond. The exchange code must be clearly stated on the bond to show that the bondholder has the right to be exchanged. The exchangeability of the bond allows SHKP to access a broader investor base, as it provides investors with a way to diversify their portfolios by trading in shares of SHKP.
Features of SHKP Exchangeable Bonds
The SHKP Exchangeable Bonds have a term of five years and will mature on 3rd August 2025. Each bond can be redeemed at face value and will pay a fixed semiannual coupon at a rate of 2.40%. The bonds are also strippable and exchangeable. This means that the bondholder can convert the bonds into units of SHKPs underlying H-shares on the Hong Kong Exchanges & Clearing Limited.
Benefits of SHKP Exchangeable Bonds
The exchangeable bonds offer investors several benefits. Firstly, they provide yield enhancement opportunities as the equity projected dividend yields of the underlying stock are higher than the coupon rate of the bond. Secondly, they provide lower volatility as the bonds have a fixed return and the exchangeable opportunities provide capital gains potential. Lastly, the bonds offer tax advantages compared to ordinary investment products.
Conclusion
By offering exchangeable bonds, Sun Hung Kai Properties Limited is taking an innovative route to tap into a wider investor base. Exchangeable bonds provide investors with the potential for higher dividend yields, lower volatility, and tax benefits. This is an attractive feature for both SHKP and its investors. With their strong track record, SHKP is well placed to continue to generate successful returns for its investors.
