Hyflux - Improving Fundamentals?
Improvements
1) Revision of electricity fees from January 2018, the government justify price increase due to increase in energy prices, may result in better profit margins / reduced losses from Tuaspring
2) Revision of water price upwards, the government justify price increase due to lack of revision of prices and need to readjust it to reflect market fundamentals. May result in better profit margin of Hyflux Operation and Maintenance business
3) Liquidation of fixed / non current assets to current assets to improve cash flow. Cash flow used partially to pay down preference shares / debt.
4) Eventual partial divesting of Tuaspring to unlock cash flow and reduce its exposure to the energy market, which is not within its circle of competence
5) Hyflux group will refocus on its own core business (Municipal and O&M)
Free scrip dividend (at no cost)of Hyfluxshop Shares as it is going to be listed eventually. Proposed Distribution being approved by Shareholders at the Extraordinary General Meeting. EGM is expected to be convened on 1 February 2018.
The health and wellness segment is distinctly different from Hyflux’s traditional municipal and industrial segments and separating Hyflux and 2 Hyfluxshop also allows for valuations of both entities that are more reflective of the underlying value and growth potential of their respective businesses.
The Proposed Distribution is not expected to result in any material adverse impact on the financial position of the Group. Entitled Shareholders will receive 100 Hyfluxshop shares for every 1,000 Hyflux Shares held as books closure date. Shares are currently privatised and have net tangible assets value of approximately S$0.1783 per Hyfluxshop Share
Shareholders whose Securities Accounts with CDP are credited with Hyflux Shares at 5.00 p.m. on 7 February 2018 will be entitled to the Proposed Distribution.
Threats
1) Weak Cash flow of Hyflux Group
2) High Indebtedness of Hyflux, especially with the looming threat of at least 3 i/r hikes, to be expected next year.
3) Importance of identifying what proportion of debt is in callable bank debt and non urgent bonds / preference shares. Can the company survive the next following year?
4) For preference shares holders, is there any impact of this new separate listing to them?
5) Will the losses from the previous 2 quarters continue for FY2018?
Unknowns
1) Being a New shareholder of an unlisted company.
2) Shares will be illiquid until it is listed. Net tangible assets value of approximately S$0.1783 per Hyfluxshop Share
3) Importance of analysing its balance sheet, cash flow and income statement. See if this share is worth holding to or to be divested away.
Hyfluxshop is a private company limited by shares incorporated in Singapore. Headquartered in Singapore, Hyfluxshop is the consumer arm of Hyflux, focusing on the health and wellness segment. Hyflux forayed into the consumer business in 2003, focusing on consumer lifestyle products and expanded its product offerings to include the ELO brand in 2015. Hyfluxshop and its subsidiaries (the “Hyfluxshop Group”) have three principal lines of products, namely (i) consumer lifestyle products; (ii) ELO Water and its related products and services; and (iii) ELO Green range of products.
Consumer lifestyle products of Hyfluxshop Group include a comprehensive range of sustainable and environmentally friendly water filtration products to provide clean drinking water for consumers. These products do not need energy to perform purification and can effectively 2 remove contaminants such as pesticides, heavy metals and particles with no water wastage discharge. These products are currently available at retail outlets, e-commerce platforms and are also sold to businesses.
Hyfluxshop Group has the exclusive rights to manufacture, sell, market and distribute ELO Water and its related products and services within Asia Pacific, the Middle East and Africa. Currently, the Hyfluxshop Group’s main channel of distribution is via its own e-commerce platforms in Singapore, Hong Kong, Australia and China. There are plans to expand distribution to other countries pending regulatory approvals. In Singapore, the Hyfluxshop Group has established two ELO Water therapy centres to provide ELO Lab bath sessions for consumers.
It is intended for Hyfluxshop to be converted into a public company upon or immediately prior to the Proposed Distribution. For the avoidance of doubt, after the conversion into a public company, but prior to the Proposed Listing (as defined in paragraph 3.1(a) below), Hyfluxshop will be a public Singapore company whose shares are not quoted on the Official List of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) or on any securities exchange or any other regulated markets.
Sources
http://investors.hyflux.com/newsroom/20171228_223134_600_SJLOII1TJP2PUL8Y.1.pdf
http://investors.hyflux.com/news.html/id/620507
1) Revision of electricity fees from January 2018, the government justify price increase due to increase in energy prices, may result in better profit margins / reduced losses from Tuaspring
2) Revision of water price upwards, the government justify price increase due to lack of revision of prices and need to readjust it to reflect market fundamentals. May result in better profit margin of Hyflux Operation and Maintenance business
3) Liquidation of fixed / non current assets to current assets to improve cash flow. Cash flow used partially to pay down preference shares / debt.
4) Eventual partial divesting of Tuaspring to unlock cash flow and reduce its exposure to the energy market, which is not within its circle of competence
5) Hyflux group will refocus on its own core business (Municipal and O&M)
Free scrip dividend (at no cost)of Hyfluxshop Shares as it is going to be listed eventually. Proposed Distribution being approved by Shareholders at the Extraordinary General Meeting. EGM is expected to be convened on 1 February 2018.
The health and wellness segment is distinctly different from Hyflux’s traditional municipal and industrial segments and separating Hyflux and 2 Hyfluxshop also allows for valuations of both entities that are more reflective of the underlying value and growth potential of their respective businesses.
The Proposed Distribution is not expected to result in any material adverse impact on the financial position of the Group. Entitled Shareholders will receive 100 Hyfluxshop shares for every 1,000 Hyflux Shares held as books closure date. Shares are currently privatised and have net tangible assets value of approximately S$0.1783 per Hyfluxshop Share
Shareholders whose Securities Accounts with CDP are credited with Hyflux Shares at 5.00 p.m. on 7 February 2018 will be entitled to the Proposed Distribution.
Threats
1) Weak Cash flow of Hyflux Group
2) High Indebtedness of Hyflux, especially with the looming threat of at least 3 i/r hikes, to be expected next year.
3) Importance of identifying what proportion of debt is in callable bank debt and non urgent bonds / preference shares. Can the company survive the next following year?
4) For preference shares holders, is there any impact of this new separate listing to them?
5) Will the losses from the previous 2 quarters continue for FY2018?
Unknowns
1) Being a New shareholder of an unlisted company.
2) Shares will be illiquid until it is listed. Net tangible assets value of approximately S$0.1783 per Hyfluxshop Share
3) Importance of analysing its balance sheet, cash flow and income statement. See if this share is worth holding to or to be divested away.
Hyfluxshop is a private company limited by shares incorporated in Singapore. Headquartered in Singapore, Hyfluxshop is the consumer arm of Hyflux, focusing on the health and wellness segment. Hyflux forayed into the consumer business in 2003, focusing on consumer lifestyle products and expanded its product offerings to include the ELO brand in 2015. Hyfluxshop and its subsidiaries (the “Hyfluxshop Group”) have three principal lines of products, namely (i) consumer lifestyle products; (ii) ELO Water and its related products and services; and (iii) ELO Green range of products.
Consumer lifestyle products of Hyfluxshop Group include a comprehensive range of sustainable and environmentally friendly water filtration products to provide clean drinking water for consumers. These products do not need energy to perform purification and can effectively 2 remove contaminants such as pesticides, heavy metals and particles with no water wastage discharge. These products are currently available at retail outlets, e-commerce platforms and are also sold to businesses.
Hyfluxshop Group has the exclusive rights to manufacture, sell, market and distribute ELO Water and its related products and services within Asia Pacific, the Middle East and Africa. Currently, the Hyfluxshop Group’s main channel of distribution is via its own e-commerce platforms in Singapore, Hong Kong, Australia and China. There are plans to expand distribution to other countries pending regulatory approvals. In Singapore, the Hyfluxshop Group has established two ELO Water therapy centres to provide ELO Lab bath sessions for consumers.
It is intended for Hyfluxshop to be converted into a public company upon or immediately prior to the Proposed Distribution. For the avoidance of doubt, after the conversion into a public company, but prior to the Proposed Listing (as defined in paragraph 3.1(a) below), Hyfluxshop will be a public Singapore company whose shares are not quoted on the Official List of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) or on any securities exchange or any other regulated markets.
Sources
http://investors.hyflux.com/newsroom/20171228_223134_600_SJLOII1TJP2PUL8Y.1.pdf
http://investors.hyflux.com/news.html/id/620507
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