Insight: DanaInfra Retail Sukuk / First Exchange Traded Bonds and Sukuk (ETBS) for retail investors

Should I invest DIN040000223, the first Exchange Traded Bonds and Sukuk (ETBS) or DanaInfra Retail Sukuk for retail investors? With 4% fixed return, it does look more attractive than fixed deposit of around 3.15% annually.

 

Back to basic. In order to evaluate its net return, we should consider all possible costs. Let assume the trading cost of this Bond / Sukuk in Bursa Malaysia is the same as any other share trading. Then, the cost of one-off transaction is

>> 0.73%, that is, brokerage of 0.6%, plus clearing fee of 0.03%, plus Stamp duty of 0.1% for dealer; or

>> 0.55%, that is, brokerage of 0.42%, plus clearing fee of 0.03%, plus Stamp duty of 0.1% for dealer;

To complete a full transaction (buy and sell), the total cost will be double, that is, 1.46% and 1.1% for trading via dealer and online, respectively.
 

Case 1 (Through Dealer):

If you plan to invest it for one year, with the assumption that the buying and selling prices are still the same, then the net return will be 2.54% per annual only (4% - 1.46%), that is fewer than fixed deposit. (Note, to be more precise to compute it IRR, it will be 4.04% due to its payment fashion)

 

Thus, this investment tool appears to be unsuitable for those who want to invest in short term. (Note: For speculation, everything is possible)

 

If you plan to invest it for two years, with the assumption that the buying and selling prices are still the same, then the net return will be 3.27% per annual only ((4% + 4% - 1.46%) / 2), that is almost similar with fixed deposit.

 

If you plan to invest it for three years, with the assumption that the buying and selling prices are still the same, then the net return will be 3.51% per annual only ((4% + 4% + 4% - 1.46%) / 3), that is slightly better than fixed deposit.
 

Case 2 (Through Internet):

By using the same calculation approach, then you should get the following results:

For one year: the net return will be 2.9% per annual only (4% - 1.1%);

For two years: the net return will be 3.45% per annual only ((4%*2 - 1.1%)/2);

For three years: the net return will be 3.63% per annual only ((4%*3 - 1.1%)/3).  

 

So, as you can see, the return is very depend on the holding time and the cost of your transaction with the assumption that the prices of buying and selling are RM100.

 

Friendly reminder, the return rate is based on RM100.00. In other words, if you buy it at RM200.00, then the return (or the so-called coupon) is still FIXED or RM4.00 per year. Thus, the higher the price you invest, the lower the return rate you will gain.


For the example of RM200 buying price, your annual return will be halved, PLUS the potential of lossing half of your investment capital. This is because issuer only will pay RM100 on the date of maturity.

 

The risk is, investors will never enjoy the potential significant capital gain. Of course, nothing is zero risk in investment; and everything is possible for speculation in short period of time. But if you foresee something bad happens for a perioed of three years, maybe this kind of investment tool does enrich your portfolio.

 

For more information, please consider this following reading as well: http://www.danainfra.com.my/images/stories/retailsukuk/KnowledgePack.pdf

 

or visit their website:

http://www.danainfra.com.my/

 

Personally, I do consider to allocate tiny portion of my portfolio to this kind of investment as one of my investment learning path. Nevertheless, the buying price will be my first consideration. That's all for today. More fascinating articles and sharing will be updated from time to time in Xaivier Blog. So, you are welcome to subscribe our feed, look at our sitemap or simply visit our Homepage for latest sharing.

Written by: Xaivier Chia

(P/S: The above sharing is solely based on personal insight. Please do not take it seriously. However, your valuable feedback are very welcome.)

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