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.
Investors must be wondering how on earth did the former A-list company come to such a sorry state. But perhaps, the biggest irony out of this corporate fiasco must be that the ones paying the highest price are often those who know the least, and also the last to know. For those who had bought the shares or subscribed to the perpetual securities, this dark chapter will serve as a painful lesson on the need to study the financial performance of the company before parting away with hard-earned monies.
Baptism of fire
For sure, the latest episode marked a [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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