Friday, May 9, 2014

UMS Bonus Issue Proposal (2)

UMS has proven to be a good investment and pleasant surprise for me. Since invested, UMS has exceeded and is able to maintain my yield consistency expectations.

With the SGX approval for the Bonus issue (announced on 7 May), UMS has announced the ex-date for the Bonus issue to be on 5 Jun. What's even better? The latest announced interim dividend of $0.01 to be paid in July (after the earlier $0.035 to be paid in May) will include the issued Bonus shares. In effect, we are getting $0.0125 for the pre-Bonus shares holding!

Another pleasant surprise is that my initial holdings for UMS happens to be a multiple of 4 lots, so I will be maximising the Bonus issue without the need to increase or decrease my exposure. From the 1st UMS Bonus announcement, it was announced that:

"Fractional entitlements to the Proposed Bonus Share Issue will be disregarded and disposed of or dealt with in such manner as the Directors may in their absolute discretion deem fit for the benefit of the Company. "

My interpretation, eg. you own 2 lots. So 1-for-4 bonus means you are entitled to 1/2 bonus lot (fractional entitlement) which will be disregarded.

After adjusted for the Bonus issue, the dividends received since invested are:
May 2013: $0.02 (adjusted=$0.016)
Jul 2013: $0.01 (adjusted=$0.008)
Oct 2013: $0.01 (adjusted=$0.008)
Dec 2013 $0.01 (adjusted=$0.008)
May 2014: $0.035 (adjusted=$0.028)
Jul 2014: $0.01

Post-Bonus issue, my average entry price has been reduced from $0.4575 to $0.366. If we included the dividends received so far, my breakeven price is $0.288. With the large safety margin based on last done price of $0.93, I can keep UMS with minimal monitoring. Once my invested cost is fully returned with dividends, it means that UMS will become my risk-free dividend generator. :D  Even if the company collapses (touch-wood!), no loss will be incurred!

Related post: UMS Bonus Issue Proposal

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