Tag Archive | "IPO"

Manchester United more than S$1.4 billion in debt

Manchester United more than S$1.4 billion in debt

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Adopt Manchester United as a novelty investment, help prevent it from getting expelled from the English Premier League.

Come fourth quarter this year, you might just be able to own a piece of Manchester United if you got some money to spare.

However, “me-too” investors looking to invest emotionally and financially in the legendary club, beware.

Since the Glazer family bought United in 2005 through a deal that was reliant on debt financing, which resulted in its de-listing from the London stock exchange, the club has been saddled in debt estimated to be about S$1.4 billion.

And as a result of debt-financing, annual interest payments amount to S$80 million.

In this present attempt at offering 30 percent share of the club to the public, United is trying to raise S$1 billion dollars hiking its valuation to nearly S$4 billion.

However, it was ranked by Forbes magazine to be worth an estimated S$2.4 billion only earlier this year.

The profitability of United is dubious as net losses of S$160 million was recorded for the full 2010 year.

Besides hefty interest repayment on debt, a bulk of United’s revenue – 46% of it – goes to massive player costs that includes wages and transfers.

Touted as the biggest sporting IPO, the move by United comes at a time the club is struggling to meet European soccer governing body UEFA’s “Financial Fair Play” rules, which makes it mandatory for European clubs to break even from the start of 2013/ 2014 season or risk getting expelled from the league.

Having won the English Premier League 12 out of the last 19 seasons, the favourable position United finds itself in is its bulging fan base, with 330 million or two-thirds of all supporters based in high-growth Asian markets.

United’s keen interest in this region has seen it partnering with Malaysia-based F&B company, Mamee Double Decker, to leverage on each other’s brand reach.

Speculation has it that United is launching its initial public offering in Singapore likely due to Hong Kong’s barring of unprofitable companies from listing on its exchange.

Read the original articles here, here and here.

Ways to make money with stocks

Ways to make money with stocks

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Part one of the series “How to start investing in stocks and shares”.

Investment speak

Sound like a pro in no time

Stocks and shares: These two words are often used interchangeably to denote certificates indicating you own a portion of a company. Stocks are a kind of equity instrument.

Equity instrument: Documents indicating that you own the rights of ownership to a firm.

SGX: Short for Singapore Exchange, a holding company which owns outstanding stocks from other companies. Outstanding stocks are those issued to outside investors.

Mainboard: In the SGX, Mainboard is a market catering to established companies.

Catalist: Also in the SGX, the Catalist market caters to fast-growing companies.

Volume: The amount of trading activity associated with a stock during a period of time.

IPO: Short for Initial Public Offering, it is an event where a company offers stocks to the public for the first time.

Blue chip stocks: Stocks from well-established, well-known, and financially sound companies.

Capital gains: The profit resulting from investment in stocks and shares.

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IN THE stock market, stocks are often referred to as equity instruments. After investors purchase stocks or shares, they become shareholders or owners of a company.

Once the shares of the company are listed on the stock exchange, the shareholders can sell their shares in the market at any time.

There are about 774 listed companies (Mainboard and Catalist) on the Singapore Exchange whereby you can buy shares from. The volume and price are determined by the supply and demand for those shares.

There are different types of shares, including: ordinary shares, preference shares, loan stocks, and so on.

When a company issues an equity instrument like stocks, it is done through a process called an initial public offering (IPO). In this case, public investors are invited to buy “ownership” or subscribe to pre-determined prices of a company.

Two ways to make money

Dividend Payments: Investors can make money from yearly payout dividends from the invested company. Generally, bigger and established, listed companies are popular with investors because of their track record of consistently churning out profits. They are considered blue chip companies.

The company’s board of directors will reserve the right to declare dividends. Regardless of the company’s performance, the board of directors have the option to either pay out dividends for shareholders, or reinvest the profits back into the company.

At the company’s annual general meeting, shareholders also have a “voice” in major decisions like issuing dividends. However, voting rights are proportionate to the number of shares held by shareholders.

Note that the dividends received by shareholders are taxable as part of their taxable income. However, capital gains from shares are not taxable, and losses cannot be deducted as expenses from your personal income tax.

Capital Appreciation: When you buy a share at a low price and sell at a high price, you can make money through capital appreciation. The movement of share prices are dependent on a variety of different macroeconomic and microeconomic factors.

In terms of the macroeconomic factors, the stock market is dependent on how well the global and local economy performs. Good profits from companies tend to translate into good share prices. Stock markets tend to move ahead of the economy and therefore investors should pay particular attention.

Another factor that will affect stock prices might be rising inflation as it eats into companies’ earnings by raising costs. Inflationary pressures also signal an overheating economy that will prompt authorities to raise interest rates to cool the economy down.

The stock market usually moves in the opposite direction of interest rates movements. Falling interest rates make shares look attractive as other traditional investments like bonds, or fixed deposits offer low returns.

Microeconomic factors deals with the actual performance of the company, hence the importance of finding promising companies through the process of fundamental analysis. The criteria for analysing a company’s performance include financial ratios, nature of business, quality of management, and growth areas.

Got any queries about investment and financial planning? Do email us or comment below to tell us your concerns.