SembCorp Industries should invest in Hyflux Ltd
On 22 May 2018, Hyflux rocked the market by announcing that it is seeking High Court’s protection to reorganise their liabilities and businesses. Meanwhile, Hyflux also requested for a voluntary trading suspension of its shares and securities listed on SGX. But the biggest bombshell had to be the non-payment of the distribution on its $500 million 6.00% Perpetual Capital Securities, which will be due on 28 May 2018.
Previously, I have written an article on Hyflux perpetual securities and highlighted its risks. Readers can subscribe as members to access that article for reference. The perpetual securities were selling like hotcakes back in 2016 because investors were lured by the seductively high yield against the backdrop of low bank interest rates. The latest announcement would have left investors in a no-man land as they cannot sell their shares nor the perpetual securities for the next six months.
Given the non-payment of the coupon payment in 28 May 2018, holders of the bond would likely to face some form of impairments on their investments. It is also likely that when the counter reopens in six month time, there might be heavy short-selling or possibility of shareholders dumping their shares, causing the share price to crash.Read more