Is hyflux the only one?

[touchring1]

Sometimes I just wonder how is it possible to make money in Singapore with such high costs, and if financial engineering is actually used - borrow from banks, bonds, share capital raises, bury the capital expenditures into assets/goodwill.

Recently, the case of khc writing off huge amounts from the books. If a warren buffett company can be caught doing this, practically all other companies are culpable. But it is because it is a warren buffett backed company, that they dare to make such huge writeoffs without impacting their credibility.

Any accountant around can advise? thks.

 

[bright_84]

The issue is really how valuations are done.

This is a hot topic now.

 

[touchring1]

The issue is really how valuations are done.

This is a hot topic now.

There's a lot of cheap liquidity in Singapore, at least until mid-2018. Sometimes I wonder why MNCs setup shop here despite the high operating costs. Could it be due to it's easier to get cheap bank financing for capital expenditure?

 

[Toni90]

There's a lot of cheap liquidity in Singapore, at least until mid-2018. Sometimes I wonder why MNCs setup shop here despite the high operating costs. Could it be due to it's easier to get cheap bank financing for capital expenditure?

They set up shop here because they are not stupid.

 

[BBCWatcher]

Sometimes I wonder why MNCs setup shop here despite the high operating costs.

There are a variety of other reasons, including:

• English widely spoken/written
• safety
• political stability
• regulatory and legal stability
• tax avoidance
• skilled workforce
• lack of corruption (relatively speaking anyway)
• occasional government concessions (e.g. from the EDB)
• high connectedness (port, air travel, telecommunications, etc.)

 

[revhappy]

Blue collar labour is cheap. You can hire a maid here for $800? Try doing that in any other developed country.

 

[Mr.Canberra]

There's a lot of cheap liquidity in Singapore, at least until mid-2018. Sometimes I wonder why MNCs setup shop here despite the high operating costs. Could it be due to it's easier to get cheap bank financing for capital expenditure?

Cheap financing is the reason. Especially those working in the commodities sector will know this.

Blue collar labour is cheap. You can hire a maid here for $800? Try doing that in any other developed country.

Domestic helpers cost a bomb in western countries. Those who are already rich will just hire a full time butler.

What you pay is what you get. You must manage your expectations from the cheap imported domestic helpers you get in Singapore. You pay peanuts so don't expect super smart butler Alfred that works for Bruce Wayne (Batman).

 

[henrylbh]

They set up shop here because they are not stupid.

 

[touchring1]

I think the problem is many think we are still in 90s or early 2000s. The workforce in a lot of countries in our region have already improved a lot. Indonesia and Thailand has improved tremendously. thailand already better than Singapore in recent years. The only one area that Singapore is much better is advertising Singapore in cnbc, bloomberg, etc. All these countries have even cheaper blue collar workers so we can't compete on that basis any more.

 

[Tiger9119]

Thailand also advertised in CNBC

 

[SpeedingBullet]

Sometimes I just wonder how is it possible to make money in Singapore with such high costs, and if financial engineering is actually used - borrow from banks, bonds, share capital raises, bury the capital expenditures into assets/goodwill.

Recently, the case of khc writing off huge amounts from the books. If a warren buffett company can be caught doing this, practically all other companies are culpable. But it is because it is a warren buffett backed company, that they dare to make such huge writeoffs without impacting their credibility.

Any accountant around can advise? thks.

i think some here missed TS' main point on financial malfeasance. Companies like Hyflux and some other heavily-levered-with-sh1tty-cashflows (Starhub?) have many red flags that provide ample warnings quarters or even years in advance. That juicy yield that many people chase is essentially the potential "reward" that is paying off for the risk that they take.

In the case of KHC, it's almost impossible to tell. But those M&A munchers tend to have (Valeant anyone?) massive writedowns after a glut of acquisitions because sometimes some bets go wrong and they pile up.

I don't think accountants can advise on this. Short sellers are your best bet, go read Muddy Waters' pitches (can be several hundred pages long) and how they analyze a company - they even flew a drone over a target company's purported factory, only to find an empty field

To really identify a great company or a fraudulent one requires intense focus and research which can take months or even years.

For the average man on the street? Just buy ETFs and relax. Or at worst, buy companies that aren't so crazily levered like Hyflux with deteriorating cashflows.

 

[hindsight]

Sometimes I just wonder how is it possible to make money in Singapore with such high costs, and if financial engineering is actually used - borrow from banks, bonds, share capital raises, bury the capital expenditures into assets/goodwill.

Recently, the case of khc writing off huge amounts from the books. If a warren buffett company can be caught doing this, practically all other companies are culpable. But it is because it is a warren buffett backed company, that they dare to make such huge writeoffs without impacting their credibility.

Any accountant around can advise? thks.

Asset writedowns occur all the time, its perfectly legal and fine as long as the company isn't overly leveraged with a debt covenant thats tied to its debt/asset ratio. Companies don't go bust due to asset writedowns, they go bust when their businesses fail to generate free cash flow.

I think things have looked grim for KHC in the last 2-3 years, free cash flow has been anemic since 2017, the merger created a temporary spurt in EBITDA that quickly faded away as 3G tried to cut costs and raise prices in order to pay for the LBO, that didn't work due to the secular decline in the branded packaged goods business, consumers just weren't willing to pay such high premiums for them anymore, in short Heinz overpaid for brands that were facing serious headwinds and they were punished.

Hyflux was in a similar but worse situation, the company was essentially all in on Tuaspring, they took on a lot of debt to fund TS, but that turned out to be a cash burning monster that made their problems worse.

 

[touchring1]

Buffett's own words - "Only when the tide goes out do you discover who's been swimming naked.". When liquidity dries, we'll know who cooked the books.

 

[peterchan75]

GE(General Electric) was once the most valuable company. Jack was treated like corporate god.

A few acquisition flops and share buyback. Puffs... everything disappear.

 

[Hot_Dog]

Business is like that one, living on the edge. Thats why big bosses always buay song . Company owe alot of money die die must make the sales

 

[Mecisteus]

Asset writedowns occur all the time, its perfectly legal and fine as long as the company isn't overly leveraged with a debt covenant thats tied to its debt/asset ratio. Companies don't go bust due to asset writedowns, they go bust when their businesses fail to generate free cash flow.

I think things have looked grim for KHC in the last 2-3 years, free cash flow has been anemic since 2017, the merger created a temporary spurt in EBITDA that quickly faded away as 3G tried to cut costs and raise prices in order to pay for the LBO, that didn't work due to the secular decline in the branded packaged goods business, consumers just weren't willing to pay such high premiums for them anymore, in short Heinz overpaid for brands that were facing serious headwinds and they were punished.

Hyflux was in a similar but worse situation, the company was essentially all in on Tuaspring, they took on a lot of debt to fund TS, but that turned out to be a cash burning monster that made their problems worse.

So the keyword is always look at the cash flows.

Companies can fake earnings but cash cannot fake.

A good company will generate good cash flows and higher cash balances over the years.

 

[limster]

So the keyword is always look at the cash flows.

Companies can fake earnings but cash cannot fake.

A good company will generate good cash flows and higher cash balances over the years.

dividend investors also like to look at free cash flow and dividend coverage! Power of CD!

 

[Shiny Things]

So the keyword is always look at the cash flows.

Companies can fake earnings but cash cannot fake.

A good company will generate good cash flows and higher cash balances over the years.

Nah, cash balances can be faked as well. (Peregrine Financial, anyone?)

 

[touchring1]

Nah, cash balances can be faked as well. (Peregrine Financial, anyone?)

All statements we receive, including the green one, is essentially an IOU from a financial institution.

 

[Tiger9119]

Nah, cash balances can be faked as well. (Peregrine Financial, anyone?)

Peregrine invested in a taxi company in Indonesia and they lose big .