Aug 20, 2016

Cory Diary : Hyflux 6% PerCapSec Part 2

Just as I have written recently on Hyflux 6% PerCapSec (corrected term), they decided to play punk. Thanks to Swiber ! We have a lesson learned. Will the macro stock market get worst ? I think it can, considering poor Singapore economic performance. But fixed returns are kind of "Protected under Lehman definition haha " provided the firm continues to be alive.

Before you read, I like to warn again. For those who see the world in "Black" and "White", please ignore me ... err I mean my article as is a lot of Estimation, Guess work and Intuition.  This mean you need to grow up to own your decision. I have to own mine often. :)

Below Par

Hyflux 6% PerCapSec price dropped to 0.946 (Below Par). Below Par happens to Oxley and Aspial bonds too. Thus, likely market sentiment. And this happens when retailers did not do their home work. This also tell me there maybe opportunity created by the fearful.

If Hyflux pay up their dividend this Nov on the Hyflux 6% PerCapSec, the return will be 0.03. With two more potential gains to come along with it.

a. Return to parity meaning 0.054 more.
b. Premium of the listed PS which may hit 0.02.

That's a total of 0.054+0.02+0.03 = 0.104 returns or potentially 10.4% within 3 months and a week. Hope I get it right. Greed set in. haha. I think is worth my time to do some investigation and assess the risk again.


The problem started with Swiber. So I think maybe i should do a comparison between Hyflux and Swiber information. Please do your sum as I manually key it off quickly from the information I got from the web so there maybe careless error.

When i look at the data as a non-financial reader, I see work being done in Hyflux. I see growth. In-addition Hyflux has a key financial advantage which is Hyflux 6% PerCapSec to support flexibility which Swiber didn't get in time.

Model Strength

Hyflux supports build and Operate. Engineering, Procure and construct. This are analogy to "Printer". The recurring income from membrane sales will be like "Printer cartridges".

Cash Flow

• Operating cash flows after SCA and tax paid included investments into construction of
Qurayyat IWP and TuasOne WTE project.
• Investing cash outflows mainly for investment in PT Oasis Water International, a 50%
joint venture in Indonesia.
• Financing cash inflows mainly from proceeds from issuance of $500 million perpetual
capital securities in May 2016.

What people see is cash flow. But what I see is strong management oversight. I see execution. I see financial supports. I see they have a plan and seems to know what they are doing.


As previously mentioned Hyflux 6% PerCapSec is a little for the risk we have to pay for to proof their model is successful as we may lose our investment. But why would anyone want to pay more if they can get sufficient subscription. If they have paid higher and screwed their investment returns, is a lose-lose proposition.

As right now, the returns from recent market sentiment is quite attractive.
If I am to bet, I will be on Olivia side. But do I dare ? Once we go in, it can be a slippery slope of no return. This is Investment Risks.



  1. the 6%PCS refered to in the post is BTWZ? maturity 2020..

    if comparing BTWZ vs N2H (also 6%)
    wouldnt the latter, N2H, be a relatively "better" buy?
    its divd is coming up too, maturity is nearer, and the current price is at 4-5% below par.

    1. Hi chamneleon, "short answer" I agree with u. The "long answer" , the first call is 2018 April, so 3 payments left ? Premium gain on item b. maybe lesser. If my plan is to hold long term, 2020 PS maybe be better as the price may go up after Oct as this implied Hyflux is still paying.

      Well they can do another Swiber thing LOL. Considering their recent cash from 2020 PS and we truly believe in Hyflux Business model else any of them will be really risky. That's talking to myself.

    2. The new issue is not considered preference shares. Is clasified as Capital Securities.

  2. actually, i am vested on BTWZ (2020)
    but contemplating the N2H (2018), since it has dropped so much ..

    i am with the same view as you on the LT propspect of water industry. its not as sexy as oil and gas and we may not need oil in future, but water... thats essential for survival
    razor thin margins ,but their revenue will on the multi-year O&M contracts with govts.
    we may not need oil, but water...

    1. Yes. They appear to have a plan and viable strategy to grow and earn after. Is not like they are buying time. They do pay quite a sum to get the multi-year contracts and this should have value attached. Especially so when Hyflux remains the sole supplier of its proprietary membrane technology as well as its EPC work.

    2. Hi FC

      Sorry to interrupt here Cory.

      I think the dirty price, which is including the accrued interest, is a lot favorable for the ncs that has the call option in 2018 than the recent perps with callable in 2020.

      If indeed you are still interested in this, think its better to switch, especially the shorter duration matters a lot in terms of managing the risk.

    3. thanks B and Cory for the insights.
      still lots to learn from you guys..

      anyway, not that it matters in terms of investing, but just curious,
      does anyone know why N2H per share is $94.X ..
      while the BTWZ is 0.9X per share?

    4. I remember DBS 4.7%PS has this size range due to lot size of 100 shares. Yes better check up again and don't trade beyond the figures haha. This is another risk but system risk :)

  3. queuing up for a small punt on the N2H .. lets see where this goes

    1. There is constant sell down even though price moving up slowly. Picture unclear. :)

  4. STI is a place that show many kiasi behavior. PS has recovered much. :-)