Asian Pay TV Trust Review for Q2 2018-Plummeting Unit Price And Goodbye To 2019 Dividends

Frankly speaking, I am extremely disappointed with the financial performance of Asian Pay TV Trust (“APTT”) for Q2. Disappointing as in the ARPU has not stabilized at all as per asserted by APTT management for many prior quarters. Q2 2018 saw further decline instead of “stability” in the key performance indicator of all its business segments. I have previously posted that in the absence of visibility of earnings upgrade from the ARPU, I will not put in more investment into APTT due to the intense competition disrupting its business.

Basic Cable and Premium Digital Cable TV Q2 2018 Performance

APTT is clearly facing tremendous competition from pirated Android TV boxes, Netflix and other online video streaming medium-IPTV. The piracy issue is not just a Taiwanese issue. This is a global problem. In Singapore, Starhub is a very good example of another pay TV business that is seeing declining subscription from the rampant piracy issues. I am sure many of you all know of some colleagues/friends or relatives who have purchased those “TV boxes” from Sim Lim Square and then decided to cancel the monthly subscription to Singtel and Starhub pay TV services due to the super cheap cost. So far, the content pirates are still outwitting authorities & pay TV companies and proved almost impossible to shut them down. 

Broadband Q2 2018 Performance

In addition, APTT is also besieged by unlimited wireless data packages from mobile operators on the Broadband front. The availability of low cost unlimited data offerings from top Taiwanese mobile operators means that APTT is forced to offer higher speeds at competitive prices to acquire new RGUs and re-contracting existing RGUs. The CAPEX invested over the past few years for growth purpose turns out to be more of a defensive CAPEX nature in order to address the decline in broadband subscription over the past few years.

 

Management assertion on share buyback due to undervaluation of share prices

APTT senior management gave reassurance to all investors during the Q2 results presentation by pointing to the assertion that “With a stable and resilient cashflow, APTT is a defensive business that is positioned to grow in a measured way”.

The 4 main growth drivers are as follow:

(1)         Up sell and cross sell across TBC’s subscriber base for future growth;

(2)         Scalable and efficient cost structure. There is headroom in network capacity to allow provision of additional services at limited incremental cost to support future inorganic growth;

(3)         Broadband Growth intact from opportunity to gain more market share. Moreover, there is rising demand for higher speed broadband due to rapidly growing demand for data AND

(4)         Premium Digitial TV. Room for growth as digital cable TV penetration in Taiwan is still lower than that of Korea, Singapore and Hong Kong.

The management team has mentioned that APTT is exploring potential unit buybacks as the current unit price of APTT is undervalued. At the same time, it wanted to strengthen its balance sheet hence as a result, the Board of directors is of the view that the distribution per unit in 2019 is likely to be lowered to support the initiatives.

My thoughts before final parting for Q2 2018 review

I find it incredulous that at this juncture, the management team feels strongly that APTT is undervalued by the market. A declining service pricing and uncertain future market outlook (declining historical track record since IPO) can also mean that the business activities will continue to worsen. I will not be surprised given the upcoming super fast 5G mobile network roll out and also unresolved rampant piracy issues. APTT is already warning investors that the overall performance of FY2018 will be worse off than FY2017. The cutting of future 2019 dividends in a way seems to be an admittance that the historical business model of leveraging heavily from bank borrowings is no longer sustainable in view of the competitive operating environment.

Using the dividend discount model and assuming dividend is cut by 50% due to lower cashflow and to fund CAPEX, the price may drop to S$0.216 per unit once it is announced officially in Q4 with regard to the slashing of dividends. I do not think investors will accept a cost of equity lower than 15% for holding on to APTT unless the business outlook and revenue generation improved drastically.

I am thus unsure why the management choose to want to cut dividends instead of continuing to utilize cheaper bank borrowing at effective interest rate of a mere 3.4%…..unless despite all the positives painted in the presentations, they have no confidence and are in fact very worried over the declining APTT business and worsening cash flow generation. But I reckon that APTT management team is probably really just being prudent in its new approach and I am just thinking too much?     

The Global Financial Crisis Strikes Again Year 2018!

The Global Financial Crisis is back again in 2018! Another Era (再创世纪) is currently being broadcasted. This is an amazing show which draws invaluable lessons from the Global Financial Crisis in 2008 but of course with elements of drama added into it. Also, I find it closely resembling the various office politics in real life and is able to draw parallel to it. 

The great Roger Kwok (郭晋安) plays a resourceful man who was only a low level salaried staff and how he rose up to riches. Roger is some of those folks out there that you will meet  in life who does not see anything right or wrong with how he made his money. Whatever the means, as long as it helps him in his quest to become rich, his principle values do not have the values of good or bad that bounds many other people. In business, he justified the scheming plots and working with other cunning old foxes as exchanging of what each other needs as a fair deal. Also, in the stock market, if there are winners who made it big, there will also be losers who ruined themselves financially. 

Danger of over leveraging and economic outlook is all about consumer confidence.

Roger basically brought down the wealthiest Fang family in Hong Kong by bribing a personal lawyer who keep encouraging the 富二代 CEO to load up on mini bonds while his father,the capable Group Chairman was being hospitalized. When the US government came out to bail out some of the financial and insurance companies as well as Fannie Mae and Freddie Mac, there was a mini stock rally. The corrupted family lawyer managed to get the stupid CEO to take out huge loans using his family shares of the Fang family listed business as collateral to buy more mini bonds and stocks by persuading him that the crisis is over and stock prices will shoot up and it's time to make more money. When the US government decided to let Lehman Brother collapse without rescuing it, the global stock prices continued to free fall. With the value of the collateral of Fang listed shares dropping and the CEO not having enough cash to top up the collateral, the lending bank sold off all the Fang listed shares. The abundance of Fang shares dumped into the market lead to a share price collapse from HK$100 to HK$25 while allowing Roger Kwok to jump in and accumulate the Fang family business at a super cheap price. Damn smart unscrupulous guy!

The moral of the story here is one can never know how bad the financial crisis will become. The 2008 Global Financial Crisis was considered mild relative to the 1930s Great Depression. If one is forced to liquidate during such market downturn and do not have sufficient resources to prevent a force selling of  one's own stock purchases, one will suffer tremendous realized losses. This is the danger of over leveraging on loans or margin financing. The world was lucky that Ben Bernanke, a student of the Great Depression and belief in staunch government intervention managed to prevent the crisis from worsening.  

Complex financial products such as sub-prime mini-bonds is not for all retail investors.

In "Another Era", the series antagonist Roger Kwok approached the "good guy" Frankie Lam (林文龙) to offer him a job at his new Company. Roger greatly admired Frankie for his wits in advising the then 2nd richest man in Hong Kong  on how to rescue the Hong Kong Stock Exchange by engineering a series of financial moves to restore confidences back in companies, institutional investors  and also retail investors. However, Frankie replied that he will never align himself with such an unscrupulous man like Roger.  The next shocking thing that Roger responded was that the Minibonds product were designed by Frankie himself so as a matter of fact, Frankie himself is no saint as retail investors lost more than HKD$20 billion due to this sub-prime creature. 

Frankie lamented that the mini-bond was supposed to be for corporate companies and the greedy banks repackaged them and sold them to the man on the street without highlight on the complex underlying securities risk on this product.  

  

The lesson here is never to purchase a financial product that you do not understand. Do not follow the herd instinct. Buying something without adequately understanding it and succumbing to thoughts on easy money will make one vulnerable to total loss of investment.

Final thoughts

The "Another Era" is an awesome show starring many prominent Hong Kong Stars and highly recommended. It is cleverly written and depicts the financial market as well as the greed of man accurately. A must watch for all retail investors!

Investment Portfolio Updates- Aug'18 (Much Volatility in the Market)

Passive income projection of S$25.3K per annum @ 6.13% yield (Dividends only and exclude CPF and rental income)

Total stock portfolio and deployable cash for investment is S$425K (excluding investment property and CPF)

For the past few months, the stock market has been on a see-saw ride after the market correction. I am glad that my significant weightage on REIT component has withstood much of the market downside with vastly lesser volatility relative to other SGX counters.

Key highlights of the following main changes to the portfolio:

1. Sold off all my Netlink Trust holdings at a loss. The stability that I craved for seems to be facing an upcoming technological disruption from the 5G mobile network. The risk of downside has increased significantly relative to the upsides. Decided to re-deploy the proceeds into other oversold listed business on SGX.

2. Purchased 3,500 units of Singtel at S$3.060 per unit. Market has oversold the blue chip. Upsides potential from Singtel. Also since then, TPG has announced possible M&A with Vodafone in Australia.  

3. Purchased ThaiBev. Oversold counter. Take out and normalise the prior period fair value gain and the underperformance percentage is lower than the plunge in price. This is one counter that I have been keeping an eye on for its excellent diversity in its principal activities and operations in different consumer markets. Took advantage of the sharp decline to S$0.650 previously and bought 30,000 shares. Looking forward to deploying more cash into ThaiBev if the price dropped further. 

4. Increased shareholdings of Global Investment Limited. Fair value a lot higher than market pricing. Even if market downturn, there will be adequate margin of safety to avoid a total investment wipe-out. Looking to re-invest the upcoming dividend proceeds back into the business.

5. Increased shareholdings in Perennial Real Estate Holdings. Capitol hotel operations to commence operations in Q4 2018 and Chengdu integrated development have started operations in Q3 2018.

6. Added Parkway Life REIT as part of a more defensive move and also due to its better pricing after recent market correction for this medical REIT.

7. Sold off part of Asian Pay TV Trust. The recent quarter results have not stabilised and still in decline. CAPEX deployed are not generating growth but seems to become defensive in nature of existing revenue. Dividends will definitely be cut by next year in view of the poor business performance.

8. Sold off part of Fraser Commercial Trust to diversify the concentration risk. Also the promised growth engine from UK may not have the previously anticipated high upside in view of current Brexit discussion which does not seemed to be going well.

Government Solution to HDB 99 year leasehold expiry issue- Voluntary Early Redevelopment Scheme (VERS)

This is awesome! Our Prime Minister had announced during the National Day Rally that HDB will be launching (albeit in another 20 years time) the Voluntary Early Redevelopment Scheme ("VERS"). Under VERS, HDB owners of flats aged 70 years old will be able to vote (akin to enbloc for private properties) for the government to buy back their homes before the end of the lease. Considering that more than 80% of our fellow Singaporeans live in HDB flats, this is certainly a right step in resolving the depreciation and eventual zero value of HDB flats upon the end of the 99 years old lease period. VERS thus offer another solution for Singaporeans to preserve at least part of the value of their beloved homes and hard earned money.

The 99 years leasehold expiry nightmare suddenly surfaced last year (2017) when our Minister for National Development, Lawrence Wong, mentioned that HDB owners should not assume that their aged flats will definitely undergo Selective Enbloc Redevelopment Scheme ("SERS"). As a matter of fact, it was reported in the Straits Times that the flat identified for SERS was only a miserable 4% since 1995. There is actually an inextricably intertwined relationship between HDB and private property prices. If HDB prices crash eventually for aged HDB, then there will be less resources for HDB potential upgraders to get private properties. This leads to a vicious circle in terms of the future of Singapore Property market whereby the bulk of one's wealth is tied to the home where they are living in. 

While I am happy with the announcement of VERS which in a way will prevent a total erosion of the wealth of most Singaporeans, there are still some mind boggling aspects which I want to point out.

Firstly, new generation of Singaporeans are getting married later these days when compared to 10 to 15 years back. According to the Singapore statistics 2017, the median age is now around 30 years old for first time groom and 28 years old for first time bride- please see below screenshot.

From Statistics Singapore 2017-www.singstat.gov.sg

Now, let's assume that a young couple will always follow the traditional route of waiting for a BTO flat to be ready first before getting married. This means that a married Singaporean couple will be around 30 years old for the husband and 28 years old for the wife. VERS is only available when the flat is aged 70 years. So by that time, the first time buyers of the flat-if still alive- would have already reached 100 years old. I believed that both would have kicked the bucket and will not be able to enjoy VERS. More of would be for the future descendants to benefit from this legacy.

It seems to be catering more for the 2nd time, 3rd time and so on and so forth resales buyers to reassure them that the government will be giving them an exit option when they reached retirement age and to continue to pay high high prices for resales. So keep the record S$1Mil HDB resales purchases going and property crazy mindset going. We will probably need to wait for the government to tweak the details for this scheme such that it does not veer towards this route. 

Secondly, we all saw what happened to the recently collapsed bridge in Italy. Reinforced concrete cannot last forever. Most buildings in Singapore have steel  embedded in the concrete and in our hot and moist tropical weather, they will corrode eventually and weaken the building structure via spalling of the concrete. Will most HDB be able to survive till 70 years old in terms of structural integrity as well as the monthly maintenance cost?

Last but not least, what if residents who oppose the VERS at the 70th year later regret it (smacks of the Brexit which appeared to have no trade deal concluded in place yet)? So does it mean people who have disagreed on the one and only redvelopment vote at 70 years, later on regret it for the rest of their lives? This is different from private property where they can start new enbloc proceedings 2 years after the previous failed attempt. Perhaps the government can offer 2 VERS during the life time of the HDB home similar to the 2 upgradings during the life time of a flat that was announced during the National Day Rally. Maybe first VERS at 60 years old and another at 70 years old.

There will of course also be potential acrimony issues for the VERS which are already common for private enbloc. But in the context of the greater good, the exploration and fine tuning of VERS shall cushion the harsh landing expected for the diminution in value of leasehold HDB and thus of paramount importance. 

Upcoming 5G Network Technology and Imminent Threat to Netlink Trust Business

The faster than expected development of the 5G network caught me by surprise. Just last month (July’18), Singtel and Ericsson announced that they will be launching a 5G pilot network test by the fourth quarter of 2018 to support drone and self-driving car tests in the one-north district. Also, Optus (Singtel’s Australian subsidiary) and Globe (Singtel’s Philippine Associate Company) have announced plans for the rolling out of commercial 5G services next year. I have done up some technical readings and post it here on the 5G technology characteristics so as to analyze the potential implication on Netlink Trust, which is supposed to be the backbone of our Smart Nation initiative.

Technical Characteristics of 5G   

5G builds upon today’s 4G mobile network technology. It refers to fifth-generation mobile technology which is expected to open up industry and consumer applications with promise of super-fast wireless connection speeds and lesser latency (lag time). 5G higher connection speeds will be possible due to advances in current radio technologies, increased allocations of radio spectrum, and by using many more antenna sites or base stations than today’s networks. Each mobile antenna will thus serve a smaller area or cell.

The one major difference between a fixed fiber network and 5G mobile network is that the latter’s connection speed decreases as the number of users increases. This is due to the contention effect. If 5G network has successfully been deployed at Marina Bay Float, Singaporeans attending the National Day Parade who are surfing the internet to upload photos or watch video will find the less than satisfactory connection speed. All 5G mobile devices in a vicinity connect to the local base station and will always share its data capacity. This will not affect users using a fixed broadband network.

5G base stations will always need a backhaul to connect to the internet. This will likely be in the form of optical fiber network. Hence this could be further monetize by our current Broadband Network Operator, Netlink Trust. The problem is that while Netlink Trust can theoretically earn some money from this, the bigger issue will be the loss of monthly fixed line connection fees from customers of Singtel, Starhub, M1 and TPG, that will switch to the 5G network. I will elaborate more on this aspect in later paragraph on this scary scenario.

Will 5G Replace Cable Broadband?

Similar to Netlink Trust Singapore, Australia also have their own Company operating National Broadband Network (NBN). It is interesting to note that the Australian NBN CEO thinks that there will be damaging and intense competition from the up and coming 5G network technology. This is a stark contrast to a study done by the Media Asia Partners (commissioned by Netlink Trust Singapore) which gives the following reasons on why our NBN will not face any threat from 5G: 

(i)                   Slower speed of the wireless mobile network;

(ii)                 Latency issue- average time for pockets of data to travel between 2 points tend to be slower relative to fixed broadband network;

(iii)                Mobile networks suffer from network congestion and

(iv)                Data limit suppression by current telco- there is no unlimited data plans on offer in Singapore yet.

Lightning Speed Development of Latest 5G Technology

5G provides for speeds up to 20Gbps in theory. Current trials are still ongoing worldwide. But getting 1Gbps will not pose a challenge within the next 5 years or probably even faster. This will definitely rival fixed broadband network.

Latency issue for 5G has vastly improve to 1 millisecond relative to up to 20millisecond for 4G. This is amazing as it paves the way live TV programme streaming using a mobile wireless network.

Also once the 5G base stations deployment begin, this will eventually cover the entire country. In a small country like Singapore, this can definitely be achieved within 5 years. If we take into consideration the permission clearance to access private or commercial buildings, I reckon another 2-3 years on top of the 5 years for the network infrastructure to be widespread and ready. Singapore has always embraced new technologies.

Another point to add is that in Taiwan, there are already telcos offering unlimited data plans. Fixed Broadband operators such as Asian Pay TV have reported losing their broadband customers to mobile broadband. Such a development will definitely happen in Singapore with the widespread build up of the 5G infrastructure.  

5G Impact on Netlink Trust

I was very much surprised at the availability of a technology in the near term that pose a significant threat to Netlink Trust. Initially, I thought that such technology is at least a decade away from full deployment and mass market adoption. From my personal perspective, this is a major threat to Netlink Trust.

The issue of whether Netlink Trust will be commissioned to build up the 5G network or being left to individual telcos has not been addressed. Even if appointed, Netlink Trust will need to incur significant capital expenditure before it can monetize the new wireless network. This will lead to inevitable reduction in cashflow available for dividend pay out to shareholders.

The most likely scenario will be that telcos will be investing heavily in the 5G infrastructure. While not all subscribers will switch to wireless broadband, I envisage a strong take up rate once the infrastructure gets build up and 5G permeate through every part of the country. This will lead to loss of revenue and profitability despite perhaps some upsides from the backhaul support of 5G base stations.

As alluded to the above points, I am adopting a rather pessimistic and conservative outlook on the future of Netlink Trust in view of the upcoming pressure on its cashflow due to the competition from 5G. I will thus be paring down my shares in Netlink Trust and re-deploying the capital into other businesses.

Various articles are taking different standpoints with regard to 5G technology impact on fixed broadband network. Fellow investors, please feel free to help share your thoughts on the outlook of 5G on Netlink Trust. 

Now Is The Best Time To Buy Private Property?

Just a few days ago, I had a rather exasperated conversation with a colleague who is moonlighting as a property agent. My colleague is a 40 over years old lady who is notoriously well known to be very blunt in dealing with people. The ironic part is that she is a business development manager. I am not sure whether I should be upset or to just laugh off the entire episode. The conversation I had went something like this in my office pantry during lunch hours:

BK: "Hi Xiaoling, long time never see you back in office liao. How have you been?"

Xiaoling: "Hi BK, I am fine. Just that super busy these days with work. How about you? You ok?"

BK: "Yup, I am good. Eeeer, saw the latest pictures you posted on your Facebook and Wat's App. You got this "CEA" license on your profile picture and wearing the business suit. So, you into Property now ar?"

Xiaoling: "Hehe, yup...I got my Estate Agent License. I am marketing Park Colonial. Are you interested? By the way BK, please do not tell our Managing Director or anyone in our office that I am a qualified property agent now." 

(I was feeling incredulous at this point as my colleague had actually blatantly posted her CEA license and new profile photo everywhere on her own Facebook and also Wat's App. I am sure she will get into trouble with my Human Resource team soon as the cat is out of the bag with the damning evidence splashed all over by her ownself).

BK: "Not really lah. I am actually contemplating selling off my current home and buying a re-sales HDB near MRT Station. It has always been my dream to be semi-retired and just do part time job."

Xiaoling:  "What? Buying HDB is one of the stupidest thing to do. Investing in new and bigger private property is the way to make lots of money now. "

BK: "Eeeer, no thank you. I read that the market is filled with euphoria right now. The recent additional cooling measures by the government is also quite harsh. Probably not a good time to go in. Perhaps another 1 year to 2 years if I got extra spare cash and the cooling measures on ABSD on 2nd property gets reduced."

Xiaoling: "OMG! Let me tell you how wrong you are. Now is the best time to go into buying new private property. Singapore is experiencing the start of a property upswing. If you buy now, you will be buying at a low price. BK, you need to move fast else you will miss the boat. The peak of this current upswing will be another 2 to 3 years. If you buy only next year or after, you will be buying at the peak. You will regret it if you don't listen to me. I am many years older than you and have lived through many such property cycles."

BK: "Eeer, I will still prefer to wait. I have been reading on forums and investment blogs such as Propertysoul. Most of them are exercising caution over the current market. In fact, most of them thinks that the current new launches prices are super high. Let me Wat's App you my favorite property blog."

Xiaoling: "Aiyo, what Propertysoul? Seriously, I have never heard of it before. BK, you are a very weird guy, read and believe so funny stuff. Property cycle upswing always last for 3-4 years. I am telling you that we are just starting the upswing cycle and this is definitely the best time to buy new property just before the peak. This is common knowledge and common sense. EVERYONE knows this basic fact. Also in Singapore, the property market will never crash. Our government will ensure it appreciate gradually over time definitely."

(Ok, at this juncture, I can sense my colleague getting work up as she starts to raise her voice after reading a while on a post on Propertysoul. She must be thinking of how silly I am and lacking general knowledge. I always believed that investor sentiment is what drives the entire market. Market confidence can just crash quickly like what happened in 2008 which led to rapid exit of funds and prices of assets dropped like flies. There is no fixed rule that says an upturn cycle will always be 3 or 4 years. Who can predict with absolute certainty?)

BK: "Haha, yup, you are probably right. If I really miss the boat, then too bad for me. Just not comfortable to upgrade or buy new property now. By the way, when are you going to submit to me your sales pipeline report for compilation and reporting to our Managing Director?"

Xiaoling: "Oh, pai sei, I still owe you that right? I will pass to you as soon as possible. I recall I got an appointment with a prospective retail client. Need to go off first. Bye!"

With that, my colleague beat a hurried retreat. It was only later that I discovered that my colleague may have been upset at a post by Vina from Propertysoul on "Buyers beware: Misleading message on overseas properties" posted on 24 July 2018.  Let me quote what was written: "Good or bad days, property agents still need to make a living...Very soon you will see companies selling alternative investment and agents marketing overseas properties again. The latter will claim to have no ABSD and seller stamp duty, easy to obtain mortgages and attractive returns." 

Government Should Bail Out Hyflux And Don't Put All Your Eggs Into One Basket

It was poignant to read from the news that there was a retail investor who risk losing a certain portion of his S$250K of capital investment into Hyflux bond. The retail investor in this case was a retiree who originally intent to use it to finance part of his retirement income and also to fund his children upcoming university expenses. For all retail investors caught in the current Hyflux Tuaspring crisis, I am keeping my fingers crossed that the eventual divestment and re-organisation is successful so that they can get back most of their capital.

Types of Bond

There are some who believed that bonds are relatively safer than equities. This is not true. Rather, it is more of lower volatility relative to stocks. The same stringent risk assessment of the fundamental of the underlying business entity by retail investor must still apply. Types of bonds can be generally classified into 2 main types, namely, government bonds and retail/corporate bonds.

(i) Government Bonds
For our Singapore local context, this will refer to Government Securities Bonds (SGS), Singapore Saving Bonds (SSB) and short term Treasury bills. As such bonds are guaranteed by the government, they are usually of a lesser risk for investors relative to Retail/Corporate Bonds. Less risk does not mean ZERO risk. There are countries such as Greek which defaulted on bond repayment before during the Greek financial crisis. Even for SGS or SSB, there are still risk. For example, in a scenario of extreme hostility exercised by the Malaysian government to stop the supply of water immediately to Singapore & eventual escalated armed conflicts, it may trigger exodus of MNCs and people pulling out of Singapore. Singapore ultimately does not have its own natural resources and in such extreme situation, the Singapore Government may have insufficient funds to repay back borrowers. 

Not likely, but from the fanatical antics of Mahathir towards Singapore, this is a concern. It may not just be a simple strategy of softening the negotiation for the cancellation or postponement of the High Speed Rail Project.  

 (ii) Retail/Corporate Bonds
This represents the debt financial instrument issued by companies to raise funds. For corporate bonds, most of the issuance used to be in larger denomination of at least S$250K before an individual investor can invest in it. The trending now seems to be going into smaller bite size minimum S$1K tranche for retail investor. Again the financial strength of the underlying investee company will determine the risk level. Those government linked companies or statutory board (HDB, LTA etc) bonds will be less risky while pure commercial organisation issuance (Eg: Hyflux, Aspial, Perennial) will have a higher degree of risk of default. 

Bonds are also subject to interest rate fluctuation risk. If the market interest rates goes up, price of the bond which is inversely related will decline as prospective investors demand a higher yield as compensation. 

The Need for Diversification in Investments
The Hyflux episode clearly illustrated a need for portfolio diversification. Too much concentration in one particular bond issuance or equity may lead to an unexpected loss of capital albeit how well known a Company is or how long a company had been in the industry.  

The recent Astrea class bond issuance by Temasek Holdings is a good example of a bond instrument that is supported by sub-funds with bond issuances from hundreds of companies re-packaged into this unique product. Hence any failure in one company will be balanced out by the numerous companies in the stable. 

Why the Government should step in to rescue Hyflux?
While I always believe in the free market for business to compete and run in the most efficient manner, the shareholders and other stakeholders of Hyflux have all been punished already with the plunge in share price and also expectation of a haircut of debts owing to them. 

It may come to a ludicrous situation if any prospective bidders decided to make an offer at a severely discounted fair value. The need for liquidity quickly and the short 6 mth reprieve given by the High Court means that Hyflux has the shorter end of the stick and leverage is on the bidders' side.

The Tuaspring integrated desalination and power plant is clearly a vital strategic asset of the entire nation. Temasek linked companies such as Keppel or Sembcorp should step out to make an offer based on the current selling rates of desalinated water & electricity, expected cost of running and required profit margin and not taking advantage of the current financial crisis that Hyflux is embroiled in by asking for huge discount. 

In addition, if the current crisis worsen and Hyflux really goes into liquidation, it would mean the loss of numerous jobs as well as the loss of local expertise in water treatment. This scenario will also mean heavy losses for the shareholders and bond holders. If Temasek can save Olam, surely it can come out and give a bit of help to Hyflux and all its stakeholders. 

I do hope that things turn out well and see how the next few months unfold for Hyflux which was once the market darling vaunted for its amazing accomplishments in water treatment projects locally and overseas.