Hyflux Preference Shares

Hyflux preference shares (up to $200 million) will be offered to the public at $100 per share giving 6% pa yield.

The dividends will be payable semi-annually when, as and if declared by the Hyflux Board, in arrears on 25 April and 25 October of each year.

As the Hyflux preference shares are cumulative in nature, any dividends not paid will be accrued and owed to the investor.

The minimum subscription is 100 shares ($10,000) and subsequent multiple of 10 shares ($1000).

The application period is from 14 April 2011 at 9.00 a.m. to 20 April 2011 at 12.00 noon and the preference shares are expected to be listed and traded on the Main Board of the SGX-ST from 26 April 2011.

Application can be made through electronic applications via automated teller machines (ATMs) of the participating banks, namely, DBS Bank (including POSB), Oversea-Chinese Banking Corporation Limited and United Overseas Bank Limited and its subsidiary, Far Eastern Bank Limited (together with the United Overseas Bank Limited, the “UOB Group”) or the internet banking websites of DBS Bank as well as the UOB Group.

Investors who are CPF members may use up to 35% of their investible savings (comprising the balance in a CPF Ordinary Account plus the net amounts (if any) withdrawn for education and investment) to apply for the Hyflux preference shares under Public Offer.

If the preference shares are not redeemed by Hyflux on or after 25 April 2018, the dividend rate will step up to 8% per annum.

You can download the Hyflux preference shares offer information statement below: (risk factors are spelt out on page 44 to 53)

Hyflux Preference Shares Prospectus


  1. grace says


    I understood we can buy using a combination of CPF and cash but I don’t understand the restriction stated in Prospectus, can someone share ?

    • says


      I think it is just saying that if you are only applying for $10k, you can’t use combination.

      The 35% CPF restriction is the normal cap on buying shares using your CPF OA.

  2. Jack says

    I took a look at their website. Their 2008 revenues was around 550mil with after tax income of around 11%. Does anybody have their latest income figures.
    At first, 200 million didn’t sound much but if investors are interested, it could grow to 400 million. That sure seems like a lot given their size.
    They have to pay 12 mil or 24 mil (for 400 mil allocation) preference shares dividend yearly.
    The prospectus says the proceeds will be used for projects and general working capital.
    Did Hyflux announce any new project after the Middle East crisis?
    6% seems attractive but given that anything is possible, I might try only for the minimum. Anybody have insights to share?

      • Jack says

        Thanks Martin,
        What a surprise. Income barely increase since 2008.
        I doubt they can borrow 200-400 mil without going the pref shares route. (just a guess)

  3. Raymond says

    Why Hyflux want to pay 6% coupon for 7 years (8% after 7 years) in this NCPS when they can issue fixed 7 years Bonds at lower rate ?

    Any catch ??? Pls advise.

    note; F&N pays only 3.15% coupon for 7 years Bond recently !

    • says


      There is a difference between preference shares and bonds. For preference shares, there is no maturity date. There is no obligation for the company to raise funds in 7 years time to repay the entire “debt”. For a 7-year bond, there is certainty for the bond holder (as long as the company does not go bust) that he will get back all his principal when the bond matures.

      And of course, the credit rating of F&N and Hyflux are completely different. So, even if Hyflux had issued a 7-year bond, I doubt the yield will be 3.15% pa.

      • Raymond says

        Hi Lion,
        Agreed with U but if Hyflux dont call back preference shares after 7 years, coupon will go up to 8%.

        That is a high cost debt unless they forecast interest rate will shoot up very high in 7 years !

        By the way, what is Class A ? Cant find definition in OIS.

        Thank you.

        • says

          Hi Raymond,

          Yes, 6 or 8% can be a bit high but if you remembered Hyflux water trust, I think the yields they were paying on that (as a capital funding source) was even higher.

          No significance to the Class A. Just used to differentiate between different shares.

          • sender says

            i read somewhere in their OIS or another document, the Class B is non-cumulative.

            Other than that, both A and B rank equally.

  4. sender says

    furthermore, in liquidation (touch wood), bondholders get paid before preference shareholders which is why bond pays less (lower risk).

    also, i think hyflux has quite a high gearing which if they go the bond route will further aggravate their gearing. By doing a pref shares offering, they kill two birds with one stone.

    agreed with lioninvestors that hyflux financials and histories cannot be compared with the stout “Red Lion”. Can’t find a credit rating for hyflux – possibly bbb- , just guessing. Actually, I can’t believe CPF approve it for retail investor whereas CPF money were disallowed in the past few offerings since SIA bond offering last year. Isn’t hyflux more risky than SIA, DBS, Capitaland Group of Companies and F&N? Or is the stable cashflow from the two seawater desalination projects in Singapore sufficient to guarantee future payments will not stop?

    still thinking of investing a minimum in it but undecided if buying hyflux shares is the better option. anyone has got good advice to share.

    • Jack says

      If you look at their revenue stream, contribution from Singapore is ‘peanuts’. With the middle east crisis, china is their biggest revenue. There is no doubt they are a much higher risk that the big boys, SIA, etc. But then again, they are paying 6% at the moment. So, it’s still up to the individual to decide the reward versus risk. As with most entities, the lowest risk is probably the issuer – it’s public money.

    • sender says

      quoting my earlier “whereas CPF money were disallowed in the past few offerings since SIA bond offering last year. Isn’t hyflux more risky than SIA, DBS, Capitaland Group of Companies and F&N? ”

      was just reminded that SIA bond and CapitamallAsia and Capitamall trust bonds all pay less than CPF 2.5% rate; however, DBS pref pays 4.7% while F&N 7year pays 3.15% should qualify right? Not sure what CPF use as yardstick to decide which one to allow?

      • says

        Dear sender,

        Since you can already buy Hyflux shares using CPF, it makes sense that you can buy the preference shares which is more senior (and safer) than the normal shares.

        I think you can buy the DBS 4.7% using CPF on the secondary market.

        Sometimes, it can be the case that the issuer did not apply to get the offering CPF approved.

        • sender says

          Thank you, Martin.

          Hyflux in 2010 reported about $16 million forex losses because of strong Singdollar. This year with Singdollar hitting more all time highs against USD, will Hyflux sustain even higher forex losses than last year’s figure? Those losses if managed well would be more than sufficient to pay the yearly interests on the $200m CPS.

          Martin, do you consider this hyflux CPS investment grade? Any plan to tikam some?

  5. Jasmin says

    Can use CPF to buy = safer instruments since CPF would have done the screening ?
    This is so far the best deal among SIA bond, CapitalMallAsia etc. Maybe I am paranoid, is this too good to be true?

    • says

      Dear Jasmin,

      Forget about screening by CPF where it comes to stocks. It doesn’t mean anything.

      A lot of S-chips can also be bought using CPF money.

  6. VSL says

    Hi Lion,

    Pg 37 of the prospectus indicates 5 Fixed Rate Notes are maturing from 2012 thru 2016. Could this also be a reason why Hyflux wants to borrow a seemingly high amt of money?

    Is 6 % dividend pa considered high compared with some REITs that pay even higher dividend rates? Does this mean that Hyflux biz is less risky that REIT biz? Perhaps, but I’m not sure.

    • says


      I don’t think you can compare like this. Reits and preference shares are completely two different things.

      A high yield of a REIT might be because the share price is under-valued, which makes it safer. On the other hand, a high yield and low share price could also be due to some fundamental problems with the REIT, which makes it more risky.

      • VSL says


        Tks for clarifications.

        I think what’s on several investors’ minds is why does Hyflux need so much money ($200m – $400m) for its biz size?

        If it is to retire some of its Fixed Rate Notes (maturing from 2012 thru 2016), then it is understandable.

        Is it to cover past and possible future forex losses, as one poster has suggested?

        If not, is there any other possible “sinister” motive for wanting to borrow so much money? Your views pls?

        • says

          I wouldn’t read too much into it. The official reason is to fund the water and infrastructure projects of the company. Water business is a capital intensive business. In the past, they tried to hive off the assets into Hyflux water trust in order to recycle capital. Since that is already gone, they will need to raise capital via an alternative route.

          In fact, I think the 6% they pay here is less than the yield of the Hyflux water trust back when it was trading. So in fact, it’s cheaper for them.

          • sender says

            yeah, back then, think HWT was yielding about 1% higher than this 6% CPS. moreover, there was some capital gain too.

            is this a good attractive deal?

            many retirees just want to plonk big sums in it since CPF approved. they think sure 101% profit!! …. think tis the new Gold?

            i starting to get more worrried the more i read, hear, and learn about the details… ‘

            maybe, buying their shares is less risky? any thoughts on that?

  7. Stan says


    I’m a newbie in preference shares.

    Just wondering, overall is this investment considered a good deal?

    • sender says

      for me, it’s a low quality issue. may buy only minimum so not so painful if hyflx buss. think a small little profit in the short term likely as market is hungry for yield.

      again, i may give it a miss. for fixed incomes, i prefer good quality issues.

      • AL says


        instead of fixed incomes, can consider Single Premium products if protecting invested capital is a concern/preferred choice. % is generally better than fixed incomes. With lock-in period ranging from 2 – 5 years.

        • sender says


          yes single premium product has its usefulness and i do have them. i am adding other fixed incomes choices for diversifications and returns. thanks for your reply – hv a nice day.

  8. VSL says

    Hi Lion,

    You say that you DO NOT consider Hyflux investment-grade. Why do you say that?

    What constitutes investment-grade shares? Tks.

    • says


      Investment grade means the company is rated BBB and above.

      I don’t think Hyflux has a credit rating so it can’t be investment grade.

  9. FY says

    I’m new to this preference shares. So what happens If I want to withdraw my subscription to Hyflux Preference Shares before maturity date of 2018 (7 years)? Is there any penalty?

  10. Blur says

    Dear lioninvestor,

    The minimum subscription is 100 shares ($10,000), which means that there will be no odd numbers of shares right? thanks!!

    • says

      Hi Blur,

      Don’t think there will be a problem. Since the minimum denomination for application is $1000, the shares will be traded in lots of 10 shares.

      • Blur says

        Dear lioninvestor,

        If we were to sell it in the open market, the commission for preference shares charged by securities firms are usually higher than common shares?

        If I want to sell the pref shares, it’s subject to the price and usually the price will be below par at the initial stage?

        Thank you very much!

        • says

          The commission for preference shares is the same as normal shares.

          Whether it is trading above or below par will depends on a host of factors, including the current interest rate environment, the soundness of the company and market sentiment.

  11. VSL says

    Today’s paper mentioned that the Placement Shares have been oversubscribed several times. Wow. And Hyflux is going to upsize offer to $400m for the benefit of retail investors.

    If this product is not considered investment grade, why would institutional investors fall over themselves to grab this product? I would think that there will be sufficient liquidity once trading starts. Your comments. pls?

    Based on comments on this thread, potential investors are divided right down the middle on this issue. I just don’t know what to say.

  12. 7C7E says

    Some mistakes/misconceptions to clarify:

    Hyflux is likely to be IG or at the worst, BB+. It chooses to be unrated by independent rating agencies, nothing unusual with that , just ask SIA or F&N.

    Investment grade means at least Baa3/BBB-/BBB- or better

    CPF don’t really screen if an investment is money-good, caveat emptor.

    Preference shares usually carry more risk to senior, ranking in bankcruptcy & higher spread required by investor for taking a junior tranche.

    Retail would like this as it is yieldy. Can think of any SGD instrument that pays cumulative 6% with a step-up structure

  13. OCK says

    Hi for such share, I think the following are the risk:

    1. Hyflux company itself don’t pay dividend to its own investor.

    2. Hyflux go bankrupt

    3. Bank interest rate move more than 6% making this unattractive.

    • VSL says

      This is my understanding of dividend payout policy to shareholders. Even if Hyflux does not pay dividends to it Ordinary Shareholders, it MAY pay dividends to its Preference Shareholders. However, if Hyflux pays dividends to Ordinary Shareholders, then it MUST pay dividends to the Preference Shareholders. Pref Shareholders have an advantage in receiving dividends.

      I doubt bank interest rates will go up to 6% or more in the short term. Many analysts have been predicting this the last few years, but nothing is happenning. I hope I’m wrong here.

  14. OCK says


    I applied using both CPF and cash for this counter. However, I only got allocated those that I use cash. But according to the allotment ratio in CDP website, the ratio(which I pressume to be the chances of getting) is 1:1. How come I did not get any for my application using CPF? Does it means that if I use both CPF and cash, I can only get either one of them?

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