Tuesday 8 January 2019

(Post 75/week 56)Investment project updates(Peer to peer lending):Moolahsense(My twelfth campaign)

Moolahsense(My twelfth campaign with Moolahsense)

Note*the company name will not be revealed just like the previous post as my money are still inside moolahsense, haha(this is not a sponsored post by the way)

Issuer summary
Date of listing:Mar 2018
Tenor: 6 months
Note type: Equal installment

Quote from moolahsense website
  • Equal installment:A promissory note by which an installment of the principal subscription amoung and/or interest accrued and due up to the date of payment shall be payable on such dates as set out in a repayment schedule specified in the promissory note, and on the maturity date, the principal subscription amount would have been paid in full
Repayment frequency: Monthly
  • Repayment frequency: Will be paid monthly
Target interest rate:24%P.A
  • Target interest rate: The maximum rate the issuer is willing to provide the interest on the principal subscription amount which the issuer wished to obtain, as notified in writing by the issue to Moolahsese
Purpose: Working capital

Quote from valuepenguin:https://www.valuepenguin.sg/what-is-working-capital
  • Working capital: It is a concept to describe a business ability to cover its short-term operating costs
  • E.g For this campaign, I have funded $100 into it
  • As the target interest rate is 24% PA, this means that at the end of the tenor, which is 6 month I will expect to receive $112
  • 100%=$100
  • 12%(Interest for 6 month)=$12.00
  • 112%(The Principal + the interest)=$100+ $12.00=$112.00
  • Since the tenor is 6 months, each month I will receive $18.76(inclusive of interest) in payment/equal installment
  • 1month=$112.00/6=$18.66
Summary company profile

  • The issuer is a company incorporated in Singapore in 2014
  • The Issuer is in the manufacturing industry and has around 10 employees.  
  • The Issuer specializes in the manufacture of wooden containers and crates for industrial packaging purposes.
Detail of purpose

  • The Issuer seeks working capital for the performance of various container manufacturing contracts which have been awarded to the Issuer.
Financial statement

Will only reveal a part of the financial statement due to confidentiality. As I have mentioned a few weeks ago in my post, that I only mainly use this three ratio: current ratio, quick ratio and debt to equity ratio to decide in investing in a campaign, hence I will be showing its ratio below

The ratio is as follow(left side of the column is for the year 2017/right side of the column is for the year 2016)

Year 2017/Year 2016
(Current ratio 2017:2.57),(Current ratio 2016:5.2)

  • A simple ratio of current asset divide by current liabilities
  • Current liabilities are debt that needs to clear in the short term(in a year)
  • If a company has a current ratio less then 1.0, do not invest in it
  • If a company has a current ratio more then 2.0, May consider investing in it
  • The higher the current ratio, the better
  • For the current ratio of 2016:2.57, it is higher than the recommended range(>2.0)
  • For the current ratio of 2017:5.2, it is higher than the recommended range(>2.0)
(Quick ratio 2016:2.57),(Quick ratio 2015:5.2)

  • The quick ratio is almost similar to current ratio except that it is assumed that the company does not sell its inventories(e.g Toyota inventory is its car) or stock, it is still able to fulfill its debt
  • If the company has a quick ratio of 0.75 and below, do not invest in it
  • If the company has a quick ratio of 1.25 and above, May consider investing in it
  • The higher the quick ratio the better
  • For the quick ratio of 2016:2.57, it is higher than the recommended range(>1.25)
  • For the quick ratio of 2017:1.3, it is higher than the recommended range(>1.25)

  • (Total liabilities/equity 2016:1.44),(Total liabilities/equity 2015:1.16)

  • The debt ratio is calculated by total liabilities divided by the equity
  • If the company has a debt ratio of 1.5 and above, do not invest in it
  • The company should essentially have a debt ratio of 1.0, if the debt ratio is below 0.75, do consider investing in it
  • The lower the debt to equity ratio the better
  • For the Total liabilities/equity of 2016:1.44 it is out of the recommended range(<0.75)
  • For the Total liabilities/equity of 2017:1.16, it is out of the recommended range(<0.75)

    Why did I invest in this loan?
    • The current ratio and quick ratio of 2016 along with total liabilities/equity is out of the recommended range,however the current ratio, quick ratio are within the range, taken in to consideration that the loan is only 6 month, I have subcribe to this loan and in fact, the campaign has already ended some time ago and I have received the principal along with the interest
    Repayment schedule?

    link on how too read the effective interest rate for moolahsense:http://letscrowdsmarter.com/understanding-interest-rates/

    Monthly interest rate:interest/start balance=$2/$100=2%(Percentage conversion must *100)
    Effective interest rate:2%*6=12%(almost the same as the target interest rate at 12%(see the top of the post))

    From the above picture, you can see that the Net repayment is at $17.67 instead of the $18.66 that I have mentioned above at the working capital, hence I will do a calculation here again

    1-month repayment:$17.67
    6-month repayment:$17.67*6=$106.02

    $100(the amount I put in this campaign=100%

    The target interest rate as you can see in my above post is at around 24%P.A, after taking into account of the tenor rate being 6 months, which is 12 % and comparing it to 6.02% its almost 6% difference(i shall call this net interest rate instead)in this campaign. To conclude, this means that if you invest in a (24%P. A) high-interest rate campaign in moolahsense which has a tenor rate for 6 months, you will get only about 6%

    Stay tuned to my next week post:moolahsense(my eleventh campaign)!


    1. hello
      I have read your blog before but somehow get busy with things (as usual). I wish to park some funds to try this out. How do I go about it ? Is this batch still valid ? I wonder why you put 100 instead of more based on your experience with them. Margin of Safety ? Or limited capital ? Or ??? Thanks

      1. hi it is the default that put me off,i suggest parking your fund with posb invest saver,it is a better choice.you can give it a try with peer 2 peer but do put the min requirement amt only so that when it default at least you are prepared .in short stay away from peer 2 peer

    2. The non-performing loans at MoolahSense is quite high, in my opinion. It has gotten to a stage where they have now had to remove the return on investment statistics that showed you how much returns are being generated for your investment. In my case, out of a total of about 130 outstanding loans, almost 50 are currently not performing. Of course, at this stage, only a couple have been closed off, it does show weakness in the underlying loans. My best guess right now based is that the investment with them is at breakeven. Only time will tell if I am right or wrong.

      1. Yes,in my opinion,peer 2 peer lending is still not very viable in singapore,and you are right,only time will tell.