How To Buy Shares Using CPFOA | Why I bought Keppel Corp?
Your CPFOA will grow at 2.5%p.a (for amounts above the first $20k).
Hence, this 2.5% is the opportunity cost when it comes to investing it.
You'd be better off only if you are likely to get higher returns when you take on risk.
At the second part, I'd be sharing why I bought some Keppel Corp using CPFOA.
How much can you invest with your CPFOA?
To find out, you'd need to firstly log into CPF with your Singpass.
Don't assume, if not a bounced trade can happen and your CPFIS agent bank may still charge you.
Check how much you can invest. Like the image below
The numbers above is because I've $49,590 inside CPFOA now.
What you can invest is the amounts above $20,000 only. In this case above, $29,590.
100% can be used for Professionally managed products. More here
These include unit trust funds and both STI ETF.
As to the calculations for stocks, it's a weird formula that depends also on what you have used for before or currently own. Hence, log in to check is the safest.
What else do you also need to know
You'd firstly need a CPFIS account.
Setting it up can be done with DBS/OCBC/UOB and there is a questionnaire to complete these days.
Do note that the CPFIS account will be charging you $2+GST every quarter and per trade.
Next, you'd need a brokerage account to do the buy and sell.
If you need help setting up one, email me at josh.tan@promiseland.com.sg.
For cash investments, you'd instead need a CDP account.
Not sure how? I've a guide below for you.
Thirdly, not ALL shares can be bought by CPFIS. Check here for list.
In particular, some penny stocks do not qualify and warrants do not qualify.
Long term view of CPFOA funds and idea of KEPPEL CORP
CPFOA generates 2.5% interest which is the opportunity cost.
More importantly, it is a part of your net wealth which cannot really be moved.
Unlike cash which you may need for family or consume otherwise, it's easier to take a longer term view with CPFOA funds. Perhaps taking on higher risk.
As to Keppel Corp, Temasek is doing a Partial Offer of $7.35 for it.
This was announced on 20 Oct 2019 and the objective was to increase temasek's stake to 51% (ONLY)
If you are one of these shareholders then, you may be entitled to a minimum of 38.91% of your shares being accepted in a acceptance tender if it materialises.
This means if you own 10,000 shares, you may be able to tender in 3,891 shares at $7.35.
Risk of Temasek's partial offer for KEPPEL CORP
The partial offer is firstly subject to, among others, (i) the Keppel group’s financial performance and condition not deteriorating meaningfully over the period.
In addition, consent from counterparties to material contracts which a Keppel group company is party to needs to be obtained. To know more, read here
Below is a table to show the likely flow of things... and mainly, completions if any are only Oct2020
Why I bought KEPPEL CORP
This is NOT a suggestion for you to buy Keppel Corp.
Neither is it a deep dive into Keppel Corp's business structure.
So let's keep it merely to why I bought it and the key considerations.
Prices are less than $7 these days for Keppel Corp which is much cheaper than $7.35.
That intuitively says that there is risk that this deal does not happen.
Secondly, if it were a general offer instead of a partial one, it would have been more favourable.
Now, instead of tendering to sell ALL of the holdings, only 38.91% can be tendered. Hence, 61.09% will remain if you are an investor. You'd have to remain a Keppel Corp shareholder.
#Above is a quick video on how to invest with only $1,000
Having said that, I do feel that Keppel Corp is a leader in the oil and gas sector which has been in bad shape for many years.
How much longer will bad days lasts in this sector? Is risk sucked out already?
Secondly, roughly half of Keppel Corp is into property. This is a sector I'm personally comfortable in without digging into valuations excessively.
Conclusion
As shared by a fellow member on Facebook groups, Temasek made an offer to delist Olam back in March 2014 at a price of S$2.23.
The delisting did not happen and today Olam's share price is even lower. If you had owned Olam's shares since Temasek's delisting offer, you will not have made any money.
That is possibly a lesson.
Hence, before you invest into Keppel Corp today (cpfoa funds or otherwise), carefully consider all aspects. Best wishes!
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