Hyflux

nothing new but this article does put together lums story quite nicely with some tidbits of info here and there

https://www.dealstreetasia.com/stories/h...um-130319/

(11-04-2019, 08:29 AM)ACTIVIST SPEAKS Wrote: 3.   Why did Hyflux go to the retail market to raise money in the 2016 perps for the purpose of redeeming another perps held mainly by institutional investors, bearing in mind that there was no obligation to redemption and Hyflux was desperately in need of money then?

Because the institutional investors that bought Hyflux perps are powerful enough to make the Hyflux BOD fear reprisals from them, if the redemption was not done. Furthermore, Hyflux also wanted to buy time and wait for the recovery in the energy market.

But the institutions have waited long enough, and so are unwilling to extend loans. 

From the perspective of Hyflux's shareholders, its BOD did the right thing by not alarming the stakeholders -- that TS is bleeding badly and no banks/institutions want to (re)finance it -- and seeking alternative means (which in this case are the retail perps) to raise funds. 

I have little doubt Hyflux BOD must surely know things were not going well when it sold the retail perps. TS never stopped bleeding for many years. Why then, do they raise fund from retailers, knowing that things were not going well? Treacherous, these people are!

There is a lesson here on how capital markets work; one of the reasons companies raise funds (either through sale of shares or debt), is because things are not going (as) well. There are those that seek listing for greater visibility and credibility; but you can tell which company belongs by looking at their balance sheet.

OL n BoD subscribed to the 2016 preps, how much of their net worths, we dunno, banks then sell to mom n pops, say it’s willing buyer, willing sellers..

Sometimes parents deliberately eat vegetables in front of their kids, and exclaim how delicious it is, before the offering the vegetables to their kids.

Past filings show OL and BOD's purchase of the perps. My impression was that it was 1 or 2 lots for the BOD, 1 or 2 million for OL. Definitely an affordable marketing expense, at least for OL, given the dividends she received.

haha the vegetables analogy is painfully apt!

I think you are over complicating it. Hyflux miscalculated on TS as a business pure and simple.

As for why mom and pops buy into it, yield chasing is a “time honoured” method of getting killed. The market for collateralised mortage obligations pre GFC was so hot partly because the Super senior or senior tranches of the securities were rated AA or AAA, yet offered a yield higher than equivalent rated simple bonds or loans. In the singapore context, think Pinnacle minibonds.

It is easy after the fact to say (A) “it was so obvious a fool could see it” and (B) “why didn’t someone warn retailers against it”.

I note the many institutions also miscalculated on their investment. They only difference is, they can afford it since it is only a small fraction of their total portfolio. It is scary to see how a retailer could commit so much of their life savings to it.

(12-04-2019, 07:58 PM)BRT Wrote: nothing new but this article does put together lums story quite nicely with some tidbits of info here and there

https://www.dealstreetasia.com/stories/h...um-130319/

After reading the following quotes from the dealstretasia.com's article :

".....The company expanded into China and by 1999 had developed its own technology using hollow-fiber ultrafiltration membranes.

.....The new technology was the breakthrough that would transform the company’s fortunes, allowing it to bring proprietary technology to a market that was under increasing pressure to meet stricter environmental standards in Asia and gain new fresh water supplies in the Middle East. “Everything comes from membrane technology,’’ Lum told Bloomberg TV in a 2005 interview. “We use membrane to treat wastewater; we use membrane to desalinate seawater; and we use membrane to purify water from the air.’’
"

I am wondering, if Hyflux is allow to go bankrupt, then who will supply membranes for the reverse osmosis process in all the desalination plants in sg? If the membranes from a competitor is good enough and can also be used, then there is no moat in Hyflux's proprietary membrane technology in the first place.

Hyflux's membrane technology is not unique as I recalled. When Singapore called the tender for the first New Water plant, there were multiple tenderers from more established players. That was my recollection.

(14-04-2019, 11:13 PM)tanjm Wrote: I think you are over complicating it. Hyflux miscalculated on TS as a business pure and simple.

As for why mom and pops buy into it, yield chasing is a “time honoured” method of getting killed. The market for collateralised mortage obligations pre GFC was so hot partly because the Super senior or senior tranches of the securities were rated AA or AAA, yet offered a yield higher than equivalent rated simple bonds or loans. In the singapore context, think Pinnacle minibonds.

It is easy after the fact to say (A) “it was so obvious a fool could see it” and (B) “why didn’t someone warn retailers against it”.

I note the many institutions also miscalculated on their investment. They only difference is, they can afford it since it is only a small fraction of their total portfolio.  It is scary to see how a retailer could commit so much of their life savings to it.

Agree that Hyflux was too aggressive and miscalculated on TS but I felt compelled to say that it is not totally unforseen. How often have VB experienced warnings ignored because it doesn't happen next week, month or even next year? We live in a "hurry" "instant" society when such stuff have long tail, and sometimes very long, just as SMRT maintenance problem...

(14-09-2016, 11:59 AM)specuvestor Wrote:

(04-05-2015, 12:43 AM)specuvestor Wrote: Firstly i have to admit that i do not follow water stocks closely after my experience with Hyflux and Hyflux Water Trust.

http://www.valuebuddies.com/thread-4415-...#pid112031

^^That was a decade ago. I realized their cash flow and their revenue do not match (to put it mildly) as they pre-book revenue whenever they sell their completed project to another 49% owned entity ie consolidated to associate, but profit from sale booked. So thereafter whenever they make the final sale to the municipal, govt etc the stock doesn't move cause there is no more PnL to book.

In the same logic, they had to sell HWT to recycle their cash cause their business model was extremely capital intensive. I forgot the logic of privatizing it later.

I think it is important to figure out the capital intensity of water stocks, despite the nice macro / concept.

But when people are chasing yield or hot stocks, fundamentals may not be the most important thing. And yes it is also a function of risk manangement and asset allocation. 5% of portfolio and 50% of portfolio are different type of fool-hardy, as well as the timeline: I'm sure there were people who made money from Hyflux investment as well.

(14-04-2019, 11:29 PM)wsreader Wrote:

(12-04-2019, 07:58 PM)BRT Wrote: nothing new but this article does put together lums story quite nicely with some tidbits of info here and there

https://www.dealstreetasia.com/stories/h...um-130319/

After reading the following quotes from the dealstretasia.com's article :

".....The company expanded into China and by 1999 had developed its own technology using hollow-fiber ultrafiltration membranes.

.....The new technology was the breakthrough that would transform the company’s fortunes, allowing it to bring proprietary technology to a market that was under increasing pressure to meet stricter environmental standards in Asia and gain new fresh water supplies in the Middle East. “Everything comes from membrane technology,’’ Lum told Bloomberg TV in a 2005 interview. “We use membrane to treat wastewater; we use membrane to desalinate seawater; and we use membrane to purify water from the air.’’
"

I am wondering, if Hyflux is allow to go bankrupt, then who will supply membranes for the reverse osmosis process in all the desalination plants in sg? If the membranes from a competitor is good enough and can also be used, then there is no moat in Hyflux's proprietary membrane technology in the first place.

(15-04-2019, 08:17 AM)LionFlyer Wrote: Hyflux's membrane technology is not unique as I recalled. When Singapore called the tender for the first New Water plant, there were multiple tenderers from more established players. That was my recollection.

Back when Hyflux was into China water treatment they were one of the best, so their BOT project was part of the package. Just as Midas. But China progressed.

Timeline is underrated. Execution of investment is also a function of timeline besides price / valuation and catalysts.

Considering Hyflux was the one who built the first Singapore desalination plant, it is reasonable to assume they knew what they were doing when they bid for Tuaspring in 2011. Hyflux wanted Tuaspring at all cost. After EMA and PUB announcements, we now know the desalination plant lost money even when USEP was 60+. There is no upside to the desalination plant and the contract signed with PUB is destined to be loss making for the entire period of 25 years (as expected by Hyflux). Of course, the power plant project, which is supposed to offset the desalination loss, also did not work out as planned.


Back to the 2016 Perps, I was originally of the view there was an absence of malice in the retail offer as the directors also subscribed. With the Karlmarx's vegetable analogy, I change my opinion. In addition, the 20m perps reserved for management was undersubscribed by 70% despite the overwhelming retail application.... at least most of Hyflux management were not willing to risk any monies for that 6% return.