Since upgrading the Transpacific Step-up Preference Securities (Transpacific SPS) in Opportunity on the scrap heap from 11 Sep 13 (Buy – $95.37) the price has barely moved so you may wonder why we’re downgrading. The difference between now and then is that the stock has lost its entitlement to a $3.18 half-yearly coupon, which those who bought in before 24 Sep will soon receive. And with most of the returns expected to flow from distributions there’s little wriggle room in the price you pay. With that in mind we’re adjusting our buy price in the recommendation guide down by the aforementioned distribution to $93.00 and downgrading a notch to HOLD.
However, bear in mind that, all things being equal, as the next six months pass by, the price we’d be willing to pay for the stock will rise as the next coupon payment accrues – at a rate of about 50 cents per month.