What You Need To Know About Hyflux Ltd Now

In 1989, Malaysia-born entrepreneur, Olivia Lum had quitted her promising career at Glaxo Pharmaceutical and founded Hydrochem (S) Pte Ltd with a start-up capital of S$ 20,000. In her early days, Olivia has knocked on doors of countless factories across Malaysia and Singapore to sell water treatment products. Olivia wanted to give up. But fortunately, she did not.

In 1992, Olivia has obtained the exclusive rights to distribute membranes & membrane filtration plants to industrial customers. It was the spark which fuelled the growth of Olivia’s business. Nine years later, in 2001, Olivia had listed Hyflux Ltd on the second board of the SGX. In 2003, Hyflux Ltd was promoted to the Mainboard of the SGX.

Subsequently, Hyflux Ltd grew rapidly and became an international success. In 2011, Olivia became the first Singaporean and the first woman to win the Ernst & Young World Entrepreneur of the Year. Definitely, it was a historical moment for Olivia, for women, and for Singapore.

Regrettably, today, it seems that Hyflux Ltd is hitting a speed bump. Olivia is currently facing the biggest challenge of her life as a businesswoman. Hyflux Ltd is now undertaking a financial reorganization exercise to ensure that the firm has adequate cash flows to stay in business. Investors’ confidence is now at an all-time low as Hyflux Ltd, which was worth S$ 2.0 billion in 2010, now is valued at S$ 164.9 million.  

So, what happened? What is the future prospect of Hyflux Ltd in the future? In this article, I’ll cover 9 key things that you need to know about Hyflux Ltd before you invest. They are:

 

#1: Stock Symbol

Ticker Symbol: SGX: 600
Market Capitalization: S$ 164.9 Million (30 May 2018)

Share Price: S$ 0.21 (30 May 2018)

Industry: Utilities

#2: The Business

Hyflux Ltd is involved in the following businesses:

  1. Water Plants
    Hyflux Ltd designs, constructs, and operates water, wastewater and seawater treatment plants under service concession agreements. Its landmark projects include:  

    1. Magtaa Desalination Plant, Algeria
      (Capacity: 500,000 cubic meters per day) 
    2. Souk Tleta Desalination Plant, Algeria
      (Capacity: 200,000 cubic meters per day)  
    3. Qurayyat Independent Water Project, Oman
      (Capacity: 200,000 cubic meters per day)  
    4. SingSpring Desalination Plant, Singapore
      (Capacity: 136,380 cubic meters per day)
    5. Tianjin Dagang Desalination Plant, China
      (Capacity: 100,000 cubic meters per day)
       
  2. Waste-to-Energy Plant
    Hyflux Ltd designs, constructs and operates waste-to-energy plants. It has a major project known as the TuasOne Waste-to-Energy Plant in Singapore. It is able to process as much as 3,600 tonnes of waste daily to generate 120 MW of clean and renewable energy. This project will be completed by 2019.  
  3. Integrated Water & Energy Plants
    Hyflux Ltd is involved in two integrated water & power projects. The two projects are:  

    1. TuaSpring Integrated Water & Power Project, Singapore
      (Capacity: 315,800 cubic meters per day / 411 MW energy)  
    2. Ain Sokhna Integrated Water & Power Project, Egypt
      (Capacity: 150,000 cubic meters per day / 457 MW energy)

#3: The Financials

Hyflux Ltd has recorded decline in profitability since 2010. It had started to incur shareholders’ losses in 2016 and 2017. Hyflux Ltd has been incurring a string of cash outflows from its operations since 2010. As such, the firm had funded its capital expenditures and its dividend payouts through cash raised from bank borrowings and from investors through equities.

As at 31 March 2018, Hyflux Ltd has reported having long-term borrowings amounting to S$ 1.20 billion. Its current debt-to-equity ratio works out to be 124.51%, which is relatively at a high level.



Source: Annual Reports of Hyflux Ltd

#4: The Financial Restructuring Exercise

Hyflux Ltd was negatively impacted by the TuaSpring Integrated Water and Power Project, Singapore. This is because of depressed electricity prices as a result of an oversupply of gas in Singapore. The poor performance from this project had caused a liquidity crunch to Hyflux Ltd which led to its decision to undertake a financial restructuring exercise in 2018.

In regards to it, Hyflux Ltd has decided not to make distributions to holders of its S$ 500 million 6.0% Perpetual Capital Securities that was scheduled on 28 May 2018. This is because Hyflux Ltd intends to preserve cash in order to finance the completion of its existing projects and its operations, both locally and abroad in the near future.

The restructuring exercise is currently in its initial stages where Hyflux Ltd is assessing the position of all of its stakeholders, such as customers, vendors & suppliers, shareholders and holders of perpetual securities. The management aims to complete the reorganization process in 6 months. In the meantime, it is not possible to predict the final outcome of this restructuring exercise.

For more details of Hyflux Ltd’s Financial Restructuring Exercise, click here.

#5: Order Book

As at 31 December 2017, Hyflux Ltd has a total order book of S$ 2.71 billion.

From which, Engineering, Procurement and Construction (EPC) accounted for S$ 0.99 billion of the order book whereas Operations and Maintenances (O&M) projects accounted for S$ 1.72 billion of the order book.

The EPC order book consists of mainly the Qurayyat IWP Project in Oman and the Ain Sokhna IWPP Project in Egypt. Whereas, the O&M order book is the summation of future revenue of its portfolio of plants over the next 20 – 30 years of the concession period.

#6: New Contract Awarded

In early April 2018, Hyflux Ltd was awarded a contract to supply a seawater reverse osmosis desalination package at a contract value of EUR 68.7 million with an additional EUR 10.5 million for optional add-ons. Hyflux Ltd expects this contract to contribute to its financial results starting in Q2 2018.

#7: Exiting from Saudi Arabia

On 23 May 2018, Hyflux Ltd has announced that it had exited involvements in the development of three desalination plants in Saudi Arabia. It is in view of Hyflux Ltd’s capital position as it is now restructuring to improve its own financial position. There is no material financial impact on Hyflux Ltd upon the termination of this agreement.

#8: Investors Relation

For further enquiries or to request for additional investment information on Hyflux Ltd’s Investors Relation matters, you may contact:
Mr. Wesley Chia

Executive, Group Communications & Corporate Marketing

Telephone: +65 3157 7660

Email: wesley_chia@hyflux.com

Ms. Dawn Tan

Assistant Vice President, Group Communications & Corporate Marketing

Telephone: +65 3157 8134

Email: dawn_tan@hyflux.com

#9: Major Shareholders

As at 14 March 2018, Olivia Lum is the biggest shareholder of Hyflux Ltd as she has 34.05% shareholdings of the company. Olivia is appointed as Hyflux Ltd’s Executive Chairman and Group CEO.

If you are just getting started in learning about investing in the Asian Stock Market, we have created a full 15-Video Course for you to help you get up to speed on how to look for great investments in Asia. Click here to find out more.

Ian Tai

Ian Tai is the founder of Bursaking.com.my, a platform that empowers retail investors to build wealth through ownership of fundamentally solid stocks. It is an essential tool that sifts out stocks that grow profits consistently from a database of over 900+ stocks listed mainly in Malaysia. As a Malaysian with close family ties in Singapore, Ian publishes a series of newsletters on how anyone can invest profitability in both countries.

One thought on “What You Need To Know About Hyflux Ltd Now

  • June 7, 2018 at 11:17 am
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    Hyflux will rise again in view of current events in the world

    Reply

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