Monday, June 4, 2018

A happy ending for retail perpertual securities - Tiger Air and Hyflux

What happened to actual retail perpetual securities holder in beleaguered local listed companies? In my previous posts, the perpetual securities holders were not retail ones, but generally accredited ones who traded in the wholesale market. As of now, i can only think of Tiger Air which was delisted in 2016.
Disclaimer: I am not an investment advisor. Heck, i am not even working in the financial industry. Below are my interpretation and i am grateful if you will let me know if anything i say is wrong and i will correct it in a reasonable time. I am not an expert and don't wish to be assumed to be one. I make losses frequently.

To be clear again just in case, Tiger Air is in a totally different market. It has Singapore Airlines as its sponsor who in turn has Temasek as a large shareholder. Hyflux doesn't. What about the similarities, Tiger Air was burning cash, racking up massive losses in their Australia, Philippines and Indonesia ventures, over ordering of aircraft and going into debt.

Income statement of Tiger Air 
In the blue boxes, massive losses in 9 months FY2015 and FY2014.
Income statement of Tiger Air

Balance sheet of Tiger Air
In the green box, this is the amount of retail perpetual securities held. In the red boxes, it shows total equity and total liabilities respectively. 
As perpetual securities should really be a 'loan', the 'more accurate' total equity should be modified to (278,690 - 218,087) = 60,603.
Adding perpetual securities to total liability, it is modified to(218,087 + 679,218) = 897,305

Tiger Airway 31 March 2014 ( column highlighted with boxes)

Comparing Tiger Air and Hyflux modified liability to equity ratio
OKkkkkk.... Hyflux looks really bad. This is based on 31 March 2018 here. Please go and verify. As with Tiger Air, i subtracted the $900,000 perps ( BTWZ and N2H) from equity and added to liabilities ( Current and noncurrent). 

Tiger Air's capital raising activities
While the modified liability to equity ratio seems better for Tiger, it must be noted that unlike Hyflux, Tiger had been much more proactive in raising funds.
In summary:
1) 2011, rights issuance ,raising SGD158m @ SGD 58 cents per share.
2) 2013, rights issuance, raising SGD 76 m @ SGD 47 cents per share.
3) 2013, preferential perpertual securities issuance to existing shareholders, raising SGD218 m. ( On a side note, these were convertible ones and paid 2% pa for the first 5 years. Subsequently, it seems there is no guarantee, im not sure as i can't find the exact terms)
4) 2014, rights issuance, raising SGD227 m @ SGD 20 cents per share, with a further capital injection of up to SGD$140 million by SIA

Tiger Air IPOed in 2010 @ SGD1.50 by the way if you are interested to know.

The more i read, the more disgusted i am with Hyflux management. Hyflux had not done any rights issuance in history. In fact, i can only find daily buyback of their shares every year (except 2010 and 2013) from 2009 to 2015 ( latest 30 Nov 2015) This is absolutely ridiculous and is the opposite of what others are doing. Take note that rights issuance dilute one's ordinary shareholdings or to put it more laymanly, dilutes one control of the company.

Anyway, Tiger Air's retail perpertual securities holders had theirs redeemed at par in 2016 after SIA delisted Tiger with a 41 cents offer, before raising it to a 45 cents offer.

I am actually quite proud of the Securities Investor Association (Singapore) SIAS because they did speak up for shareholders about the 41 cents being not favourable. Singapore Airlines, in reponse to SIAS , justified its 41 cents price, before raising it to 45 cents.

Further reading :
1) Considerations about Hyflux
2) The fate of Hyflux
3)Will Hyflux recover? The billion dollar question
4) Hyflux-Treatmeat of perpetual share holders- Ezion
5) Hyflux - loans and borrowings - Pacific Radiance

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