Just a few days ago, I made my first investment into something which I have been looking closely at for quite some time now. I decided to get into it because I believe it is safe enough and the returns are relatively good at 13.5%.
In just 26 hours, $1 million was actually raised by this particular company. They are going to raise another $1 Million so investors still have a chance to invest in it. What exactly is this investment on?
Here are the details:
Date of Listing: March 17, 2016
Tenor: 12 months
Repayment Type: Callable
Repayment Term: Quarterly
Target Interest Rate: 13.50% p.a.
Purpose: Asset Purchase
About the company:
The Company is a well-known brand started in early 2002 by a very experienced entrepreneur with over 25 years of experience in the IT industry. It was established with the objective to be a one-stop digital lifestyle store by offering a comprehensive suite of digital lifestyle products and high quality pre- and post-sale services.
The Company generates revenue through a multi-channel point-of-sales strategy using both offline (retail) and online (e-commerce) channels to transact physical merchandise. Their products consist of a wide range of exclusive computing and mobile equipment (such as laptops, tablets, smartphones, accessories, cases, headphones, and stylus) from top IT brands and the Company's private label.
The purpose of this funding is to finance the purchase of inventory as well as for general working capital.
Her parent company (an SGX-listed company) will provide a corporate guarantee for the notes.
This investment is brought to you by Moolahsense. They got the company on board their platform where the company started this funding campaign to raise cash. When we invest in this company, we are actually lending money to the company to expand their business in return for interest.
Risks of this investment:
Many of you might be worried about the risk involved when investing through crowdfunding platforms. While risks are always present in every investment, we can reduce it by doing our homework. The risk of notes/bonds investment is when the company defaults on its payment. Looking at its financials, the company has a operating profit of $330K and cashflow from operations of $5.1 Million in the current financial year. It also has an average cash balance of $1.4 Million. This particular investment is also guaranteed by the parent company which is a SGX listed company.
I am sure the company name is familiar to most people here in Singapore but due to some confidentiality, I will not be able to mention the name of this company in this post. If you are interested to find out about the investment, you will need to sign up for an account with Moolahsense and view the opportunity in their platform. If you already have an account with Moolahsense, you can login to view this opportunity straight away.
WHAT IS A CALLABLE NOTE?
This particular investment is a callable note. In a Callable note, an issuer has an option to early redeem the note on a quarterly basis. If the note is not early redeemed, the issuer pays a quarterly interest. The principal will be fully repaid on the quarter that the redemption is early called or at the maturity date.
SAMPLE Scenario (only intended for illustration).
Assume that you invested $10k in a campaign at a final note rate of 13.5% p.a. in a Callable note.
This is a short term investment which I have also participated in. I believe it is a good opportunity with decent returns for the short term.
To invest in this short term note, check out the investment opportunity on their website here.
P.S: There have been comments on concerns regarding the investments. I have gathered the facts as below:
1. For a company which is 100% owned by a Holding company, no Director will provide the Guarantee
2. Investors need to understand, this is Credit Line to the borrower and not an Equity investment where repayments happen base on cash flows generated by operations in the borrower company
3. Corporate Guarantee of a listed company certainly has some meaning. Even today the company has a market capitalization of 16 mil
Some further facts:
1) Grp Equity is 5 mil as per latest SGX filing
2) Company is making operating profit in FY15
3) For Parent company, majority revenues comes from borrower. As the borrower financial profile has certainly shown improvement over the last FY, dividends shall accrue back to parent company.
4) about RTO being a red flag >>> not so relevant for a 12 month credit investment (vs an equity investment)
Hope this clarifies. While i understand there are still risks involved, I calculated and invested base on the risk i would be willing to take. Readers are advised not to invest more than what they can lose in any investments.
Disclaimer: This article is not to endorse any products or investments or to give any advise on any investment matters. I have written base on my experience and what I have done. Readers are strongly
advised to do their own due dillengence before investing.
This article is written in collaboration with Moolahsense. All ideas portrayed are independent by SG Young Investment.