Warning: Plenty of reading required.
Sometime ago, we received an interesting message on our Facebook page. We have no idea who that is and to be honest, we did ponder a little on how to best deliver our response.
The message is simple, “How to Recoup My Loss From Hyflux?”
That message was sent on 2nd April, 3 days before the EGM was supposed to be held. Eventually, we know that the EGM was cancelled with both sides blaming each other.
That of course came after the speaker’s corner protest organised by Hyflux shareholders who appealed to the government to bail shareholders out. Of course, we have previously wrote an article on this topic.
Back to our Facebook messenger, after awhile, we decided to release our conversation content.
For the protect the identity of the Hyflux investor who reached out to us, he/she shall be named “Investor” here.
Investor: How to Recoup My Loss From Hyflux
ITP: Hi Investor, thanks for placing your trust in us. Got to let you know first that we are not financial advisers so we don’t provide advice. However, we are fine with sharing our opinions from our own knowledge.
For Hyflux, it is a bit difficult for us to give you an answer because it depends on what you are holding onto, ordinary shares or preferential shares. Each of these stuff work differently and have different rights.
Looking at how the incident unfolds as well as the underlying business model, fully recouping investment from Hyflux alone seems unlikely. To recoup, the best way is to look beyond Hyflux. But of course, as mentioned, it is difficult to really understand or give a conclusion as we don’t know your full story.
Hyflux may be able to continue and who knows, maybe a few years down the road, it may become profitable? Or maybe it will be liquidated? It’s too early to say as all these depends on whether Hyflux can find more money, Salim deal, PUB-TuasSpring takeover. Too early to say what lies ahead for investors and Hyflux.
*Note: This conversation occurred before the Hyflux-Salim deal was called off.
But in the worst case scenario of liquidation, usually, assets will be liquidated at whatever price it is sold. The money from the liquidation will be used paid off loans, bills and so on. And then of course, pay off salaries of employees and so on. Then bondholders. Then preferential shareholders. And ordinary shareholders.
That is how it will normally work. Of course, that is the worst case scenario.
The best case scenario is, the company survives and make a comeback. Hyflux has operations in other countries as well. No doubt SG has a lot, but not holding onto TuasSpring may not be a bad thing.
Investor: I holding Preferential Share
ITP: For any shareholder, as long as the company does well. The shareholder will also do well.
Since you are a preferential shareholder, if I am remember correctly, it was written in their annual report that Hyflux will need to redeem your shares. So in a way, you are stuck with it.
Looking forward, you will need to see the direction of Hyflux. If Hyflux can turn this situation around. Your investment may turn out well. Looking forward, you got to see if the company will be sustainable in their other operations. Then add in the other variables, such as PUB, TuasSpring, Salim. And see if the future direction is good for Hyflux or not.
Example, Will losing Tuasspring be a better thing for Hyflux? Losing TuasSpring equals losing a dead weight. Go through all these, and check through the viability of the company. Understand the company, look at the annual reports. If possible, question the CEO. Ask her what’s her future plan?
If it is viable and the company turns around, shareholders will do well.
Crux is to find out if this is a real death blow or if this is just a temporary challenge. As of current, being a preferential shareholder, there is nothing much you can do other than stand with the company.
Reason being, company does well. You will do well. Don’t listen to too many market noise. Only listen to facts. There already are people out there trying to cloud you guys already.
One thing to take note, CEO Olivia Lum is the biggest shareholder of the company, she stands to lose a lot as well. All the more, she stands a lot to gain by turning the company around as well.
You can go to sgx.com, go under company announcement. Download the reports by Hyflux, to understand their company. Or you can go to their website, under Investors Relation, download their Annual Report.
Using these information and facts and mix them together with whatever that is happening right now. You will be able to make a decision on whether Hyflux can survive or not.
Do note that, if you are not financially educated, it can be a challenge.
Nonetheless, extreme times require extreme measures.
I don’t know if you are financially trained or not, but at least try to read the chairman statement of the annual report. (usually the first few pages)
And if after going though all of them and you decide that the company is still going down, then really no choice.
You got to accept that you may only get back a small portion of your money. And you have to recoup your money from somewhere else.
Only 1 Way to Recoup Your Losses
Ok, that was our conversation, which to be honest, went a bit too long.
Well, shareholders has to understand that they are SHAREHOLDERS. Which means they are the owners of the companies, hence, they need to think like an owner and do things that a business owners do. Deviating from that, means that there would be a conflict.
At this point of time, shouting at Hong Lim Park doesn’t help.
Blame games are not important now. The important thing is to find out how investors can recoup their losses, we are talking about 5 to 6 figure sums of money. It’s no child’s play.
As a rule of thumb, if the company does well, investors will do well.
We cannot predict the future. Maybe Hyflux will go bottom up. Or perhaps Hyflux will become better than before. We don’t know.
If Hyflux makes a turnaround, shareholders will do well. By then, there will be no losses for shareholders, more like profits.
If Hyflux is unable to make a turnaround, holding onto past baggage won’t help, what’s lost is lost. Then the way to recoup losses will be to earn them back again, there are so many ways to make money safely.
We chat a little more with the Investor and ended off with;
There are a lot of ways to earn money. Many different methods to make money safely through investments. As a rule of thumb, if you don’t know how to invest, better don’t touch it and leave it at CPF. If not, best to take some courses and learn the basics.
It is interesting how many are not willing to part with some money to at least learn how to invest, but they are willing to throw in thousands upon thousands “investing”.