Interview with an Investor of Hyflux

Firstly, this post will not be me doing some hindsight analysis telling you that Hyflux has negative cashflow and then trying to sell you a course on how to identify companies like Hyflux. This post is an interview with myself, aka SingularityTruth, on what I currently think and feel about what is ongoing with Hyflux.

Here it goes.

Do you own any investment with Hyflux?

Yes, I am an owner of Hyflux 6% Cumulative Preference Shares.

Do you regret buy into Hyflux preference shares?

No. As an income investor, I have been looking at many alternatives asset classes to diversify my portfolio. At that time, Hyflux preference shares totally fit my requirements, providing good income and is in the sector which is deem critical to the survival of the nation. Some investment will make money and some will lose money. This is part and parcel of investment. The only regret is not selling it earlier after showing signs of distress.

Do you blame the government for not bailing out Hyflux?

Of course not. Why would the government bailout Hyflux? PUB can get Tuasspring at a low cost if Hyflux liquidates.

I do not blame SGX RegCo and MAS also. All the financial reports submitted by the company are audited, so there is nothing within their jurisdiction that they can do. At best, the authorities may want to conduct review on the auditors but those are post events so it doesn't really matter.

If there is someone who needs to be accountable, it would definitely be Olivia Lum. 

Why do you think so?

I think not only did she mismanaged the company, she 'raided' the company reserved before filing for court protection. She was planning for her exit if Hyflux collapsed, leaving herself with a company which is worth $20 million. The company that I am referring to is Hyfluxshop. 

Just before filing for court protection, she did a dividend in specie by issuing shares of Hyfluxshop to Hyflux shareholders. After the issuance, she gains majority control of Hyfluxshop worth $20 million which essentially are money from the parent company, Hyflux. I only realized this when I came across a blog on this.

What do you think of the proposed Scheme of Arrangement?

I am against the Scheme. The only winner out of this will be SM Investments which gets a debt-free company at low cost at the expense of the investors, specifically the perpetual and preference shareholders. The payout of 3% cash and 7.6% equity are insignificant to be of any consideration. 

If you are thinking that the 7.6% equity can somehow earn you back your capital, you must be dreaming. In order for the 7.6% equity to earn back the capital, the new Hyflux shares must make a return of 1,276%. This is only possible if Hyflux found a way to turn water into oil.

Hyflux has recently amended the scheme to allocate a portion of contingency claims to the perpetual and preference shareholders. Although this is good news, it is not good enough for me. The contingency claims will only be realized after 2 years. Who knows what could have happen in between? Hyflux could have been liquidated before that or all that money could have been claimed. A bird in the hand is worth two in the bush.

The scheme of arrangement will fall on the same day as the expiry of PUB default notice. If the restructuring does not get the approval, it is likely that PUB will seize Tuasspring and it will be the final nail in the coffin. Without Tuasspring, SM Investments will pull out and Hyflux will probably have to face liquidation.

What will be your next course of action?

I have already accepted that I have lost all my investment in Hyflux. From the portfolio perspective, the percentage is relatively small so I still can sleep well at night. But in absolute amount, it is still quite a lot of money to me. I will not be attending the scheme meeting for that few hundreds of dollars when I have already lost thousands. In that sense, I will be voiding my votes. I need to move on and time can be better spent on finding other better investments.