Coronavirus (COVID-19) Presents An Opportunity For Cheap SIA Rights/Shares But Is It A Good Deal?

SIA halted yesterday and has resumed today with an announcement for more cash through a mixture of rights issue and convertible bonds. A few friends came asking if it is attractive (opportunity to enter at $3) since it is our national airlines with the government backing/support right? I glanced through the announcement, there was no fundamentals/numbers presented, so I decided to calculate them instead and have extracted the important information below.

The rights shares will be issued at an issue price of S$3.00 for each Rights Share (the “Issue Price of the Rights Shares”) on the basis of three (3) Rights Shares for every two (2) existing ordinary shares.

The Issue Price of the Rights Shares represents a discount of approximately 53.8 per cent. to the last transacted price of the Shares on the Official List of the SGX-ST of S$6.50 on 25 March 2020, being the last trading day on which trades were done on the Shares prior to this announcement, and a discount of approximately 31.8 per cent. to the theoretical ex-rights price (“TERP”), of S$4.40 per Share.

Before I even start the calculations, a general rule of thumb is that heavily discounted rights issue is a red flag. Regular readers will know that I have a rights issue calculator so let's just use that - KPO Rights Issue Calculator but we will need a few information (NAV, DPU, etc.).

The latest NAV I found was $10.25 from their FY2019-2020 Q3 presentation slide.

The current number of issued shares is 1,183,665,134 based on their FY2018-2019 Annual Report. We need this number to calculate the new NAV and PB after the rights issue.

If you are wondering how the theoretical ex-rights price (TERP) is calculated, simply take the existing number of shares multiply by the current price and add the new rights/shares that will be issued multiply by the issued price divided by the total number of shares. Similarly, we can use that to calculate the new estimated NAV which fell from $10.25 to $4.09! Having said that, the actual NAV is probably lower because they took on more debts, hence highly likely to be < $4.

Now we enter the relevant information to the calculator to determine if it is a good deal. What is a good deal? I look at it in 2 ways - yield on cost and PB on cost. Assuming that there is no rights issue and SIA does not have any cash flow issue, based on the current/entry price of $6.30, my yield would have been 4.7% and the PB would have been 0.615.

However, after the rights issue, my assumption that dividends will remain constant (we know that is definitely not happening. In fact, there will probably be no dividend this year) which would be diluted due to more shares meant a drop of dividend yield to ~1-2%. In addition, with the significant drop in NAV, without oversubscribing the rights issue, I would end up buying the shares at a premium or much more than the initial 0.615 PB. As you can see, the calculator is simply screaming bad deal everywhere.

I would also like to point out that the above calculations did not take into account the convertible bonds. To put it simply, it means that the bonds can be converted into shares which means more dilution in the future...

Last but not least, if we were to look into the purpose of the cash call, unlike REITs, SIA is not expanding the business or buying more property, the cash is used for their operating expenses and to repay other debts. If the coronavirus (COVID-19) pandemic does not end soon, with fixed operating cost and no way to generate revenue, will history repeats itself (more rights issue)? Sorry to dash some of your hopes but SIA has been trading around its NAV historically, hence it will never go back to $10 or anywhere near it anymore with this rights issue.

Yes, we love playing the miles game to take SIA First/Suite/Business flight but definitely not as a shareholder. Personally, I would rather put my precious cash in REITs now. On the bright side, this is a renounceable rights issue which means you can sell the rights or sell the shares now.

All the best to the shareholders!

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Our KrisFlyer Star Alliance Round The World (RTW) Trip Planning/Booking

Happy Chinese New Year! Never thought I would be able to travel around the world in my lifetime... but we will be doing that in two days time (!!!), thanks to KPO and his relentless effort in tackling every single mile from our credit card spending (and also thanks to my effort in spending so much money lol). Planning this RTW isn't an easy feat at all and this is likely our first and last RTW as a result. In KPO's previous post (Quick Update - Too Busy to Blog), he explained briefly on the rules of RTW. I shall continue on our actual booking nightmare.

Basically, we cannot do an online RTW booking using miles redemption. Hence, people who want to redeem an RTW can either choose to head down to the SIA service centre located at ION or dial in to SIA's hotline to perform a booking. We were quite worried that we may end up having to pay a service fee as a booking done offline will incur a service fee of USD 25 or 2500 miles per person per booking and we had exactly only 480k miles for our Business Class redemption i.e. no miles to pay for the fee. Though it was also stated on the SIA website that the fee is not chargeable if the service cannot be performed online, we were already prepared to pay. After all, it had been one of our milestones to go on this trip. 

Prior to our redemption, we had already come up with an initial itinerary based on places we had in mind to visit and some basic googling. We also utilized the Star Alliance RTW website to check that our route is valid (i.e. below 35000 air mileage and no backtracking). Below is our initial plan:

Valid routes based on Star Alliance RTW planner

Our plan for KrisFlyer Star Alliance RTW redemption

As South America was really too ulu and too few direct flights to our destinations, we had many routes that involved backtracking. One example is our flight between Merida (Mexico) and Cusco (Peru) where we had to fly up to Houston (US) as a stopover as there were no direct flights under the Star Alliance. To be double sure that our route is valid, we decided to head down to ION as we think that explaining to the service staff face to face will be a lot easier. We were mentally prepared that this wasn't going to be an easy battle as the rules aren't that straight forward and some places may not have flights every day. Hence, we told ourselves to be super flexible in terms of dates and the class that we may be flying on. With our battle gears on (2 laptops, 1 itinerary with flexible dates), we headed down to ION.

As we were in the Business Class queue, there wasn't much waiting involved. We were assigned to a lady at the counter and told her we want to redeem for RTW. Immediately she told us to hang on and went to pull out a hardcopy file with the RTW rules printed on it. She explained that RTW is not common and quite complicated, hence she needs to revise on the rules again. We were quite amused by it. We then shared our itinerary with her and she began ferociously keying into the system and checking for available flights and validity of routing. To our dismay, the dates and routing that we initially proposed were fully booked. We requested to try again plus/minus a few days but still the same results. There were simply no flights between Argentina and Switzerland! We decided to change our itinerary on the spot, replacing Argentina with Brazil instead. Honestly, we had no idea what we wanted to do in Brazil, but heck! Our super helpful SIA staff tried again by keying in Rio De Janeiro airport but still returned no results. We thought that was the end of our RTW and were discussing whether to go home to research more. Suddenly the lady asked if we wanted to go to Brasilia. We weren't even sure where's that, but apparently while we were deep in our discussions, she went to try other Brazil locations and eventually found a flight there. She really saved the day! SIA if you are seeing this, we really applaud the customer service rendered! She spent more than 2 hours going through all possible routes and went all out to help us fulfill our dream! She then helped us reserve our tickets and told us that we have to confirm within 24 hours, otherwise the slots will be released. 

We went home and KPO wanted to try optimizing a little as some flights were booked on economy class but to no avail. We then decided to go ahead with what was reserved for us and dialed into the hotline to do the confirmation. What comes next was unexpected.  The staff on the phone told us that they had re-validated the route and this was not valid. What?!?! Imagine our horror/dismay/anger. We insisted our way because obviously this had to be valid, otherwise how did the ION staff even process the ticket for us. We stayed on the phone for hours, explaining the reason for our backtracking to the staff and again to the service manager. We finally got our tickets issued by the manager a day later, obviously very tired and relieved from all these. Tip - do your reservation at the ION service centre and avoid the call centre.

We have a total of 14 flights (5 in Economy and 9 in Business) and it cost us 240,000 KrisFlyer miles and SG$435 per pax. Oh, there was no service fee too (both at ION or through the call centre).

Those highlighted in yellow = layover time of about an hour

Will we do another RTW? Not anytime soon, it's really tiring and you need to have a lot of leaves to do that. I probably wouldn't be able to if I hadn't change my job. Lol.

5 months down the road but everything still seems very surreal... Will update again on our flight experience in another post! 

You might be interested in these articles too:
- Our KrisFlyer Star Alliance Round The World (RTW) Trip Planning/Booking
- RTW to Mexico - Chichen Itza
- RTW to Mexico - Coba Ruins
- RTW to Mexico - Isla Mujeres
- RTW to Mexico - Tulum
- RTW to Peru - Cusco

Do like any of the following for the latest update/post!
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4. Instagram - KPO_and_CZM (Did you see those delicious food photos to the right --> Unfortunately, you can't see it on mobile.)

Singapore Airlines Suites Experience - SQ26 Singapore to New York

Having only taken Economy flights for our whole lives, we are always envious of those people taking the premium flights as they are always the first to board and leave the plane. Hence, we were so excited when SIA make the announcement to invite Suite Class passengers to board the plane, to the envy of all other passengers (#childish).

As we entered the A380 plane, the air stewardess and stewards greeted us by our surnames and brought us to our seats. They self-introduced and informed us that they would be attending to our needs throughout the flight. They asked if we would like a glass of champagne and highly recommended the Krug and Dom Perignon to us (only available on Suites). We agreed though we didn't share the same enthusiasm as we aren't very into alcohol. KPO even commented that he preferred Baileys to Dom Perignon. HAHA (#cheapo).

As the plane started moving and about to take off, the stewardess promptly removed our champagne glasses. We then started exploring the Lalique amenity kits provided to us - the male and female versions in the pictures below. Basically, it includes body lotion, perfume/cologne, lip balm, and facial mist. We were also provided sleepwear (S, M, L sizes available), eyeshade and a pair of noise-canceling headphone by Bang & Olufsen.

Similar to the menu in the Private Room, the food menu on the plane is CRAZY. There are two pages dedicated to coffee alone. For coffee-addicts, the Jamaican Blue Mountain coffee is only available for Suites class and I loved it!

Jamaican Blue Mountain

Flight Menu from Singapore to Frankfurt 

For food, KPO ordered from BTC, while mine is a mixture of BTC and inflight menu - see Singapore Airlines Suites - Book the Cook. See below for some of the food porn.

For starters, we had garlic bread and Cauliflower Panna Cotta with Malossol Caviar. 

This was the first time both of us had caviar, and we absolutely loved it!

Next, KPO had some oriental pork broth while I had the Chestnut Veloute.

Oriental Clear Pork Broth

Chestnut Veloute

For mains, KPO had Grilled Beef Fillet with Balsamic Onion Sauce (BTC) while I had Roasted Bacon-Wrapped Beef Fillet in Red Wine Jus with Bone Marrow.

Personally, I think KPO's dish was just ordinary, but mine was fantastic! The beef was cooked just right and the bacon enhanced the flavour of the dish further. 

Grilled Beef Fillet with Balsamic Onion Sauce (BTC)

Roasted Bacon-Wrapped Beef Fillet in Red Wine Jus with Bone Marrow

For dessert, we were served the fruits platter and Moist Bitter Chocolate Tart.

After we are done with our supper, we requested to convert the seats to the lie-flat bed. In less than 5 mins, our room was converted to this:

The two bears in the photo are provided by SIA, not sure if they provided because they learnt that it was our honeymoon, or because they saw us taking photos of Donald and Piglet. First class service indeed! The bed is super comfy and both of us soon fell into deep sleep...

When we woke up, it was time for breakfast! KPO ordered the Kyo Kaiseki (BTC) while I ordered Fish Congee (BTC). No food photo for congee as congee just looks..well..like congee...

Kyo Kaiseki (BTC)

Surprise surprise! When we thought everything was going to end soon, the crew prepared something special for us with a congratulation card. Apparently, KPO told them that we were on our honeymoon when I was using the bathroom, and they decided to throw in a mini surprise for us. FYI, the congratulation card was hand drawn! So touched!

Thank you, crew of SQ26 SIN-FRA!

Before we knew it, we have arrived at Frankfurt airport! When we alighted from the plane, a staff was there to pick us and guided us to the Lufthansa Senator Lounge. She even offered to fetch and bring us to the boarding gate when the time is right which we declined. Needless to say, we did not eat anything as we were simply too full!

Our next leg was from Frankfurt to New York. It was basically the same experience, but shorter :( 

Flight Menu from Frankfurt to New York

KPO ordered the Boston Lobster Thermidor (BTC) while I ordered the Suckling Pig with Beer Sauce (BTC). FYI, the suckling pig is not the chinese kind where the skin is crispy, but nevertheless I still love it. KPO liked his Boston Lobster too, just that he preferred the lobster in the Private Room more. 

Appetizer - Marinated Lobster Medallion

Suckling Pig with Beer Sauce (BTC)

Boston Lobster Thermidor (BTC)

Lafer's Chocolate Kiss with Grand Marnier Cream

We took a short nap after lunch before ordering the last meal on the flight. KPO ordered Artichoke Tomato Crusted Loin of Lamb (BTC) while I ordered the Marinated Pot Roasted Veal Cheek with Dried Fruit Sauce (inflight menu). By then, we were already so full that even fine dining doesn't seem to entice us anymore. First world problems.

Artichoke Tomato Crusted Loin of Lamb (BTC)

Marinated Pot Roasted Veal Cheek with Dried Fruit Sauce

Bombe Chocolat Poivre

Once we are done with our meals, we were almost reaching New York. Both of us felt that this was the shortest long distance flight ever. We had never felt time passed so fast on a plane before, though the journey took almost 24 hours. Just like the SIA advertisement, the first class experience made us feel that they have lived up to their promise - no detail is too small. The service was impeccable, right from the moment we stepped into Changi Airport, all the way to New York. We will definitely miss this. Till we meet again!

You might be interested in these blog posts too:
- Honeymoon to the United States - Renting a $275,888 Mercedes Benz Convertible with Hertz
- Singapore Airlines Suites Experience - The Private Room

- Singapore Airlines Suites - Book the Cook

- Redeeming KrisFlyer Miles for Singapore Airlines Suites = 38.6% Cashback!

Do like any of the following for the latest update/post!
1. FB Page - KPO and CZM
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3. Click here to subscribe using email :)
4. Instagram - KPO_and_CZM (Did you see those delicious food photos to the right --> Unfortunately, you can't see it on mobile.)

Singapore Airlines Suites Experience - The Private Room

About a year ago, KPO blogged about Redeeming Krisflyer Miles for Singapore Airlines Suites. A year later, we started on our very first (and hopefully not last) Suites experience. Our adventure began a week before our trip, where we had to Book the Cook for our meals onboard. Refer to below for the meals selected.

On the day of departure, we learnt that there was a First Class check-in area at Changi Airport T3. For those who have not been there before, you should see a huge sign directing passengers to the First Class drive up area when reaching Changi Airport (see image below). Follow the sign to turn left, and you will be greeted by the friendly porters who will come forward to greet you and help to bring your luggage to the check-in area.

We were invited to take a seat while the staff proceeded with our check-in. This is the first time we had our check-in done seated (yeah suaku)! The check-in area was posh and well furnished. The friendly staff helped to wrap our check-in items carefully when we mentioned to them that the items inside are fragile. 

Once the check-in was done, the staff quickly handed to us our "gold" boarding passes and the tickets to "The Private Room". Since we are not revealing our identities, we will be introducing Donald as KPO and Piglet as CZM :)

KPO and CZM in the First Class check-in area

The Private Room is located in the innermost of the SilverKris Lounge. Once we reached the SilverKris Lounge, the staff took our golden tickets and asked if we would like it back. We nodded our head and he went on to lead the way as we passed by the Business Lounge and the First Class Lounge before reaching the Private Room. On the way, he mentioned that we could use any of these lounges as well.

KPO and CZM in The Private Room

KPO and CZM being served Evian water

The Private Room is essentially just another lounge which was a lot quieter and had fewer people. When we walked past the Business Lounge, it was extremely crowded! Another difference between the Private Room and the other lounges is the level of service. The food inside the Private Room is plated (fine dining), while the other lounges are self-serve. The staff handed us the food menu as we entered. The variety of food and drinks on the menu was CRAZY a lot (see menu below). 

Dining Area in The Private Room

KPO and CZM looking at the menu and drinking Dom Perignon

We had a hard time choosing what to eat and ended up ordering most of the main courses (they are all free and KPO kept emphasizing that it was once a lifetime experience). Not sure if that was a mistake, because that made us really full even before we boarded the plane.

Food ordered:

Starters

- Oriental Soup

Mains

- Dim Sum Delights

- Baked Lobster with 3 Cheeses (*KPO highly recommends this!*)

- US Beef Prime Burger

- Assorted Satay

- Beef Brisket Noodle

- Baked Chilean Sea Bass Papillote (no photo as it didn't look good on camera)

Dessert

Some vanilla ice-cream + Chocolate cake which the staff gave us though we didn't order. 

Drinks:

- Dom Perignon

Warning: food pictures below may make you really hungry.

Oriental Soup

Dim Sum Delights

Baked Lobster with 3 Cheeses

US Beef Prime Burger

Assorted Satay

Beef Brisket Noodle

Random dessert

After our hearty dinner, we checked out the bathroom. It was sparkling clean and well-equipped with amenities. Shampoo, soap, body lotion, perfume, shaver (male toilet), hairdryer, toothbrush, mouthwash, and even the bath towels are provided! Basically, you don't need to bring anything to the washroom except for a clean pair of clothes.

After we were done bathing, we decided to explore other areas within the Private Room. There are two private call rooms, one Family Room and one computer area for surfing. 

Family Room

Computer area (Mac computer only)

By the time we finished exploring the area, it was about time to board the plane. We left the Private Room and went to the other lounges to explore (took Haagen-Dazs ice cream from the First Class Lounge) before making our way to the boarding gate. Shall review the flight experience in the next post!

You might be interested in these blog posts too:
- Honeymoon to the United States - Renting a $275,888 Mercedes Benz Convertible with Hertz
- Singapore Airlines Suites Experience - SQ26 Singapore to New York

Do like any of the following for the latest update/post!
1. FB Page - KPO and CZM
2. Twitter - KPO and CZM
3. Click here to subscribe using email :)
4. Instagram - KPO_and_CZM (Did you see those delicious food photos to the right --> Unfortunately, you can't see it on mobile.)