SGD New Issue Review : Hyflux Perp NC2 High 4%


– Price Guidance: High 4% area
– Perpetual NC2 with rate reset in year 2 and 200bps step-up in year 2
– Significant early indication of interest prior to deal announcement

Dear old Hyflux.

To the casual observer, the only thing growing healthily on their income statement is INTEREST EXPENSE.

hyflux int expense

Even revenues are not growing.
Hyflux Profit Increases Almost Five-Fold Following Asset Sales
“May 8 (Bloomberg) ……Without one-time gains of S$56.9 million that included divestments of stakes in two units to Marmon Water Singapore Pte, revenue was 29 percent lower than the year-earlier period, Hyflux said today in a statement to the Singapore exchange.”

hyflux revenues

Competition is heating up and unlike Banyan Tree, there is no first mover advantage for China’s utility business because technology is the game changer (Hankore etc in, Hyflux out). Therefore we have Hyflux moving into Algeria and Mexico these days.

25 Jun 2014
Hyflux, Banco Interacciones Sign Pact for Mexican Water Deals
June 25 (Bloomberg) — The cos will cooperate on exclusive basis on water and infrastructure projects in Mexico using Hyflux’s technologies, they say in statement today.
• Agreement marks Hyflux’s first venture in Latin America, CEO Olivia Lum says in press briefing
• Venture to tap on Mexican govt’s plans to boost infrastructure: statement

Hyflux R&D numbers.

hyflux r&d

Since our write up in Jan this year where we mentioned the key risks in their revenues and jurisdictions of operation that the company faces (which have not changed), there has been little developments  except that they have increased dividends.

Company Facts :
Market Cap                   SGD 981 million (vs 974 mio)
Dividend Gross Yield  2.7% (vs 1.2%)
Financial Leverage      4.8 times (vs 4.4 times)
Debt/Equity                 259% (vs 239%)
Debt/Assets                 52.9% (vs 47.6%)
Key Person risk           32.3%, Olivia Lum (unch)

5 analysts cover the company – 3 recommend SELL/UNDERWEIGHT, 1 recommends HOLD, 1 is NEUTRAL.

All remains now is the assessment if high 4% is good enough for 2 year risk and I have a strange feeling, the public perception that Hyflux is partially state owned or will be state owned, if need arises.

The answer to the first question is NO. Hyflux is not state owned. They did develop a joint project with Temasek for Singapore’s desalination plant though.

Hyflux Bonds Secondary Prices

Dare I say anything bad ?

Hyflux is a familiar household name here like the Tiong Seng’s and Koh Brothers’. I would stick my neck for them over Aspial and Oxley and Raffles anyday.

Yet, I will not. For all of them because Singaporeans cannot get enough of these unrated bonds and I will keep my mouth shut because the Hyflux 5.75% perpetual done in Jan is at 102 now ! even as they are up to their necks in debt.


Given they have so much debt due in the next 2 years which is likely to be a higher interest rate environment, one cannot but help wondering how long does perpetuity last ?