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22-07-2018, 10:10 PM. (This post was last modified: 22-07-2018, 10:11 PM by CY09.)
Post: #381
RE: Hyflux
Right now, Hyflux Tuaspring is making 80 mil in losses based on reported results. Th losses is after factoring amoritisation and all other expenses.

An 80 mil loss means a reduction of 80 mil has to be recorded in the book value. Hence for example if Tuaspring is s$1,400 million in the start of 2018, a 80 mil loss means Tuaspring only has a book value of s$1,320 million at start of 2019. Hence investors are unlikely to pay at current book value but factor in all future losses

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23-07-2018, 08:27 AM. (This post was last modified: 23-07-2018, 08:27 AM by AQ..)
Post: #382
RE: Hyflux
(22-07-2018, 09:44 PM)slowandsteady Wrote: Wouldn't this mean that if an investor buys TuasSpring at a lower price (and thus book it at the transacted price), then the losses will be instantly less? 

A lower purchase price means amortisation will be lower for the new buyer (under similar accounting treatment).

Hyflux will then need to book an impairment on disposal.

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23-07-2018, 12:47 PM.
Post: #383
RE: Hyflux
(22-07-2018, 11:41 AM)AQ. Wrote:
(21-07-2018, 10:13 PM)slowandsteady Wrote: With a book value of 1.47B and a concession of roughly 20 years.. does it mean depreciation comes in at 70M per annum?

I mean, this 70M annual losses we're talking about here, is this including the depreciation resulting from an inflated book value?

The correct answer should be "The accounting losses include the amortisation, but it is not clear it is linear". It could well be linear i.e. 70mio p.a. but it's just not clear to me.

A clearer picture of Hyflux's (in particular TuaSpring) financial statements is as below.

Once the contract from PUB is granted, Hyflux starts construction. It is important to note that noone, including PUB, pays Hyflux a single cent of cash throughout construction. Hyflux has undertaken to build a plant for PUB, operate it for the concession period, derive all economic value from doing so, and then return the plant to PUB @ the end.

Yet Hyflux books a profit every year during construction i.e. the EPC period, where perversely no cash enters the books (since noone is paying). If Pritam Singh is to phrase it, he will probably say that hyflux is "ownself-pay-ownself".

At the end of construction, cumulative profits reported = X. Balance sheet wise, this reflects as X in retained earnings under equities, Y as debt under liabilities, and X+Y as intangibles (aka book value) under assets. Essentially cumulative profit of X is reported @ this pt where not a cent of cash appears. Assets of X+Y then represents the pv of all economic benefits that the plant is expected to derive over its effective life.

2 things can happen next:
A. TuaSpring is sold @ book. No profit is reported but X+Y in Intangibles become X+Y in cash. Happy days and time to move on to the next EPC.
B. A does not happen and Hyflux is stuck operating it. Amortisation of the book over the remaining life begins and the operating results net of amortisation becomes the P&L.
    Suppose amortisation is 70mio p.a., and TuaSpring manages to make 70mio by selling electricity > costs, then P&L=0.
    Essentially P&L during operating phase = Revenue from selling electricity and water - Costs - Amortisation.

     Balance sheet wise: if operating profit, Asset-wise X+Y in intangibles go down, cash go up,     Liabiltity wise debt go down, Equity wise retained earnings go up.
                                  if operating loss,   Asset-wise X+Y in intangibles go down, cash go down , Liabiltity wise debt go up,    Equity wise retained earnings go down.

All this is quite clear by looking at the statement of cashflows. Operating cashflows will always be -ve and the happening bits occur in financing (when borrowing $) and investment (when divesting)

Cool accounting isn't it?

The cool accounting started years ago... Maybe there is the same option C to sell their stake to below 50% and deconsolidate Smile

PS I think liability doesnt go up if operating loss, just that leverage goes up when equity goes down.

(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.

^^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.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

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02-08-2018, 06:14 PM.
Post: #384
RE: Hyflux
Calvary is here

"Sembcorp Industries Ltd. and Keppel Corp. are among parties planning to study bids for Hyflux Ltd.’s biggest asset, according to people with knowledge of the matter, in a sale that’s key to helping the cash-strapped company get back on its feet.
Hyflux’s Tuaspring project, which includes Southeast Asia’s biggest desalination plant, has also drawn interest from Malaysian generator YTL Power International Bhd., the people said, asking not to be named as the process is private. The asset had a book value of S$1.47 billion ($1.1 billion) at the end of March, according to Hyflux exchange filings.
Hyflux had also reached out to billionaire Anthoni Salim’s Metro Pacific Investments Corp. to gauge its interest, the people said."

(24-06-2018, 10:34 PM)specuvestor Wrote: ^^ I think Yeokiwi’s rhetorical question on the case of Sengkang Kopitiam Square is in a nutshell the problem of capitalism since the industrial revolution.

It is not something new that policy making is not just about market forces. And when entities that are strategic is in question, moral hazard comes in. Reality is policy makers have to make a judgement call when to interfere, and made complicated by various vested interest. It’s not a simple binary decision.

So main question is whether TuasSpring is strategic and if so if this asset can be extracted out so that the strategic interest can be ringfenced. That’s also the approach of our transport system. Operator model?
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

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