SINGAPORE: Over the past few months, investors in Hyflux have been anxiously observing the unfolding of events.

When white knights in the form of a consortium comprising Salim Group and Medco Group (SM Investments) entered into an agreement in October last year to invest S$400 million for 60 per cent of Hyflux’s equity and to grant S$130 million in loan, things started looking up.

Then in March, national water agency, PUB, issued a default notice giving Hyflux some time to remedy defaults arising from a water agreement, failing which PUB will take over its subsidiary, Tuaspring, “as whole, or the desalination plant alone”. 

A few weeks later, PUB said it will assume control of only Tuaspring Desalination Plant (TSDP) at zero dollars, and waive off the compensation sum which it is entitled to under the water agreement. This caught many by surprise.

The future of Hyflux looked gloomier than ever on Apr 4 when Hyflux cancelled the restructuring agreement with SM investments saying that it has “no confidence the Indonesian investor will complete the deal”. Hyflux subsequently sued SM investments for its repudiation of the rescue deal and for the deposit of S$38.9 million.

Time is running out for Hyflux whose total liabilities stood at S$2.8 billion at the end of March. It now has until its next case management conference with the judge on Apr 25 to indicate if it needs more time to keep creditors at bay.

The pressure has been kept on after PUB issued a termination notice on Wednesday (Apr 17), indicating it would take over TSDP in 30 days.

READ: The fall of once-great Hyflux, a unicorn in the Singapore story, a commentary

MAJOR ROAD BUMPS

Hyflux’s well-publicised ill-timed expansion into the energy business has been a major contributor to its financial woes. The chronic overcapacity in the power generation sector and oversupply of electricity had depressed the selling price of electricity in 2016 and 2017.

Its stalled sale of Tuaspring Integrated Water and Power Plant project and Tianjin Dagang Desalination Plant, and the S$600 million joint venture project with Hitachi and Itochu Corporation to build India’s largest desalination plant in the state of Gujarat India left in limbo, added to its distress.

A large fraction of Hyflux’s Engineering, Procurement and Construction works (about S$1 billion) generated cash inflows that were stretched over lengthy periods.

HIGH LEVERAGE A DOUBLE-EDGED SWORD

Hyflux had also aggressively expanded since 2010, with a huge footprint across China, India, and Middle East North Africa (MENA), funded by the Singapore headquarters.

In the most recent five years, the main source of funds were perpetual debt and preference shares. Its debt-to-equity ratio had been on a steady uptrend, which could have been beneficial if profits were healthy as the interest expense can serve as tax shields.

But with Hyflux’s low cash inflow, its high average debt-to-market equity of 6.49 from 2013 to 2018 became a burden. Yet it continued to command the trust and confidence of investors largely because of the strategic support for clean water solutions in Singapore.

Other major players in the clean water solutions industry are not as highly leveraged. Manila Water Co Inc, the sole provider of water and water services to the East Zone of Metro Manila, has an average debt-to-market equity ratio of 0.74.

SIIC Environment Holdings Ltd, despite past debt problems, has a moderate average debt-to-market equity ratio of 1.38, while Veolia Environnement SA and Suez, both listed in Paris, have average debt-to-equity ratios of 1.49 and 1.50 respectively.

FINANCIAL CRACKS

Hyflux had also suffered losses from 2015. Profits in 2013 and 2014 were low. Net cash from operating activities had been negative since 2010.

Hyflux had managed to keep dividends positive every year, however, because it had liquidated assets for cash and borrowed heavily. It secured a sale and leaseback of some industrial property valued at S$115 million for S$111 million in October 2017.

Money raised through bond issues and preference shares were channelled towards paying off loans rather than for incremental working capital or new investments.

Hyflux was once a darling and had a huge fan club in the marketplace. Investors were attracted by its stature as a water company in an industry of strategic interest to Singapore, but that never meant that the business would never fail.

READ: Beyond scarcity and security, does Singapore need a new water narrative? A commentary

Its iconic success and Olivia Lum’s rags-to-riches story captured the imagination of many, and investors may have become careless. They may have been attracted by the high yields.

To be sure, there is no free lunch. High returns come with high risk yet obvious signs of weaknesses were ignored.

WHERE WAS THE BENCHMARKING?

Benchmarking against comparable peers would have uncovered the over-leveraging. There were clues in Hyflux’s cash flow statements – operating activities which serve as the main engine of the firm had not been producing cash for many years.

The lack of credit ratings in Singapore for local bond issuances means all investors have to do their own homework. Past corporate bond defaults include Pacific Andes Resources Development’s S$200 million three-year bond in January 2016, and Swiber Holdings’ S$551 million bonds in July 2016.

Maybe it is time to make the credit risk certification of bond issues mandatory, particularly for publicly listed companies. Sure, these issues come with voluminous prospectuses and can run into hundreds of pages.

In June 2017, the Monetary Authority of Singapore launched the Singapore-dollar Credit Rating Grant to encourage issuers in the Singapore-dollar bond market to issue rated bonds. This is a move in the right direction. It will provide greater transparency in credit risk assessment.

Issuers can claim up to 100 per cent of their credit rating expenses, subject to a cap of S$400,000 per issuer.

Maybe the barrier to obtaining a third-party credit risk assessment are the high fees charged by global credit rating agencies. But that is not an insurmountable problem.

There is an alternative public source of credit risk assessment made available by Credit Research Initiatives (CRI) at the Risk Management Institute (RMI) at the National University of Singapore (NUS), which provides a probability-of-default assessment for all publicly listed firms around the world.

And when we looked at CRI’s estimates, Hyflux’s default risk had reached the equivalent of Moody’s Ba1 rating which is a non-investment grade (based on Moody’s historical one-year average default rate from 1983 to 2017).

By 2018, it was at B2 which is five grades below investment grade. In short, the signs of financial distress had appeared as far back as February 2016.

AFTER THE PERFECT STORM

If Hyflux wishes to further extend its debt moratorium, it would need a concrete debt restructuring plan.

For now, the fate of Hyflux depends on whether it can find another white knight or white squire. If nothing is acceptable to the court, the company will be heading towards eventual liquidation.

The final recovered asset value will then depend on legal, market and even political factors related to the geographical location and business nature of those assets.

What remains then will just be the memory of a once glorious company, and traces of its assets under new owners and management teams.

Ruth Tan is Associate Professor in the Department of Finance at the National University of Singapore (NUS) Business School. Zhang Weina is Senior Lecturer in the same department.

SINGAPORE: Given its plain and rather uninspiring-looking facade, few among the busy CBD crowd would give this building behind Maxwell Food Centre a second glance.

But the edifice on Ang Siang Hill has nearly a century’s worth of hidden history. “Nothing less than sensational”, is how one architectural historian describes what was possibly the earliest Modernist building in Singapore.

It was a medical supply storehouse, a dispensary, but first of all a hospital – the St Andrew’s Mission Hospital for Women and Children – which from 1922 brought much-needed healthcare to the poor in Chinatown who had no access to proper medical care. 

The Singapore Land Authority (SLA), which manages this three-storey property, recently gave the public a rare chance to explore this site on a #SLASecretSpaces guided tour with heritage blogger Mr Jerome Lim.

Here are eight things you never knew about this mysterious building.

1. IT HAS THE OLDEST ELECTRIC LIFT IN SINGAPORE

At 90 years old, the building’s electric lift – with its collapsible iron gates and wooden panels – is believed to be the oldest such in Singapore.

And there’s a pretty poignant story behind it.

The hospital used to treat children with tuberculosis of the spine or other bones, and for years, the poor nurses had to painstakingly carry these patients up the stairs from the ground floor to the sunlit rooftop.

“These children, because of the nature of the disease, couldn’t very well make their own way to the roof,” said Mr Lim. “The only thing they (the nurses) could do to treat the disease was to bring them up to the roof for fresh air and sunshine – that apparently eased the pain.”

In 1929, enough donations were finally collected to purchase and install the lift, which was built by British company Smith, Major and Stevens, an elevator manufacturer that existed from 1770 until 1930.

The lift was still in working order up till March last year.

2. IT WAS POPULAR WITH THIEVES

After World War Two – during which it was damaged by a bomb but still continued, under the Japanese, to see patients – the hospital was turned into a government medical supply storehouse.

It was a frequent target of thieves because of its medical inventory.

Mr Patrick Ho who lived there with his family from the 1940s to the 1960s, recounted how they used to employ a policeman to guard the place.

But that didn’t deter some thieves who, on a couple of occasions, managed to tie up the watchman.

“The people from the market must have heard him shouting for help, and they untied him. Twice this happened, to two policemen,” he said. 

I heard from people that the thieves were trying to take away some drugs, like morphine.

Mr Ho’s father was managing the medical storehouse and his family lived in quarters erected on the rooftop, It had bedrooms, toilets, a kitchen and a dining area.

The storehouse later saw a change of use and became the Maxwell Road Outpatient Dispensary from 1967 to 1998, distributing medicine to those who lived around the area.

3. IT IS ONE OF THE EARLIEST MODERNIST BUILDINGS IN SINGAPORE

While its architecture may not be distinctive amid today’s towering skyscrapers, this building probably stood out in 1920s Singapore, said architectural historian Mr Julian Davison.

“Suddenly, right in the middle of Chinatown, you get this white severe Cube, It must have been sensational,” he said. “And it was (not only) a landmark building in terms of architecture but also as a kind of symbol of a new age in Singapore: The advent of the modern world.”

This building has, after all, an impressive pedigree – it was designed by Swan & Maclaren, Singapore’s oldest architectural firm better known for building the iconic Raffles Hotel, St Andrew’s Cathedral and the Victoria Memorial Hall.

When this building was being constructed, it was surrounded by modern buildings with cladding, metal frames and windows.

“And then we get this building – sheer facades and no ornaments,” said Mr Davison.

“It’s quite astonishing that this building should be found in Singapore, which wasn’t known for its advanced architecture in those days.”

 4. IT WAS BUILT TO CATER TO WOMEN WHO SHUNNED MALE DOCTORS

Asian women were once terribly uncomfortable about being treated by male doctors.

To reach out to them, Dr Charlotte Ferguson-Davie, wife of the first Anglican bishop of Singapore, set up several clinics – including this hospital in 1922 – and enlisted female doctors to care for them.

“St Andrew’s Mission Hospital, from the perspective of medical history, played a very important role in Singapore, bringing healthcare to the poor who otherwise couldn’t get access to it,” said Mr Lim.

The 60-bed hospital cost S$111,000 to complete. It operated on voluntary donations and grants as the government’s annual grant of S$1,800 was insufficient to meet its expenditure.

5. SOME OPERATIONS WERE CONDUCTED HERE WITHOUT ANAESTHETICS

Dr Ho Boon Liat, who was a director of the hospital, offered a glimpse of life in this institution during the Japanese Occupation in his book, the ‘Syonan Interlude’.

“The amazing thing (was that) procedures – forceps, abnormal presentations, retained placentas – were performed without anesthesia. It sounds barbaric now, but we had finished our stockpile of anesthetics before the end of the very first year of the (Japanese) Occupation,” he recounted.

Due to the hospital’s location near Chinatown’s brothels, the hospital also treated venereal diseases and “quarrels were very frequent among the women of this locality due to trade rivalry,” said Dr Ho.

6. THE ROOFTOP OFFERED A VIEW OF DEATH HOUSES

The Street of Death – or the infamous Sago Lane with its funeral parlours and death houses – was just a street away, and former resident Mr Ho recalled seeing and hearing funeral processions two to three times a week.

There was also that constant smell of opium wafting through his house right on cue every evening at around 8pm, from his neighbours who were opium smokers.

“(During) that time, I think most Chinese people smoked opium,” he added. “I can recognise how opium smell like… it wasn’t an unpleasant smell, but very strong.”

7. IT WAS TANG’S CORPORATE OFFICE

This building was, most recently, the corporate office of Singapore’s oldest department store Tangs.

C K Tang Limited occupied the premises from 2012 to 2017 while various spaces at 310 Orchard Road (TANGS at Tang Plaza) were undergoing refurbishments, said a CK Tang spokesman.

8. IT HAS NO CONSERVATION STATUS

The building has been marked for residential and commercial use, but it doesn’t have conservation status.

Mr Lim feels with its “many layers of history”, in order to document this “some thought should be spared on conserving the building”.

“I think it’s quite important. The St Andrew’s Medical Mission played a very important role, they built this building and…we find that this building has had many uses.”

For now, the SLA is working with other government agencies to put the property up for either adaptive reuse or longer term plans.

SINGAPORE: Tampines Mall was forced to shutter its doors temporarily after a fire broke out in the shopping centre on Thursday (Apr 18) afternoon.

It reopened to the public about two hours later at 7pm, but said that some shops had chosen to remain closed for the rest of the day.

The fire involved a deep fryer at an atrium fair, the Singapore Civil Defence Force (SCDF) said, adding that it responded to the incident at about 4.30pm.

Members of the public had used dry powder extinguishers and a hose reel to help fight the blaze, which was extinguished before SCDF arrived.

A man was taken to Changi General Hospital for smoke inhalation, SCDF said.

Footage posted on Twitter showed flames near an escalator as a thick cloud of smoke rose into the air. Customers were seen scrambling to safety.

In an statement on Facebook, Tampines Mall said that a small fire had broken out in the atrium of the mall.

“The fire has been put out. As a safety precaution, we have temporarily closed the mall,” it said.

The fire happened near the Spring Kyushu Fair, a Japanese food fair taking place at the mall. Photos sent by eyewitnesses showed flames next to a stall selling deep fried and braised seafood.

CNA reader Joanne Tan said she was standing next to a stove beside the stall, when she saw it catch fire.

“The fire spread very quickly,” Ms Tan said. “The fire alarm was triggered because of the smoke. I was choked by the smoke.”

She added that several men tried to put out the blaze with fire extinguishers, but they were only able to contain the fire momentarily.

“The fire kept coming back bigger and bigger. The last thing I saw was they were pulling the fire hose to the stall, before I was dragged out by my friend,” Ms Tan said.

“Initially everyone nearby came over to help, but when the smoke was overwhelming, security guards and some men were shouting to others to leave the mall.”

Another witness said he was on the first floor of the mall when he was told by security to evacuate.

“A burning smell was present. Everyone inside was evacuated; everyone was calm,” he added.

“More than four police vehicles were seen, two ambulances and one fire engine.”

Jane Kwek told CNA she was in the Hush Puppies store when the fire started at one of the stalls at the Spring Kyushu Fair.

“The fire was contained in the stall on level one. The smoke covered the entire mall and an announcement was given to evacuate. Security also ushered us to evacuate out of the mall,” she said.

“I was shocked as I have not experienced a fire before. I did not know what to do until the security ushered us out of the mall. The smoke was choking but did not sting.”

SCDF confirmed the mall was evacuated by security personnel as a precautionary measure, and that the cause of fire is being investigated.

Mr Mustafa Abdul Rahim, general manager of Tampines Mall, said: “The fire was quickly put out. As a safety precaution, the centre management office evacuated all the shoppers and tenants in the mall. 

“The SCDF arrived shortly to assess the situation. Tenants started to re-enter the mall at about 5.55pm and the mall reopened to the public at about 6.45pm.

“The safety and security of our shoppers and tenants is of paramount importance. We are giving our full cooperation to the authorities on their investigations into the cause of the fire.

Din Tai Fung, a Chinese restaurant at Tampines Mall, posted on Facebook informing customers that the outlet was temporarily closed.

“Due to unforeseen circumstances, our restaurant at Tampines Mall will be temporarily closed,” it said.

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This story came from a reader tip-off. If you would like to send in photos or videos of something newsworthy, WhatsApp our Mediacorp news hotline at +65 8218 8281 or message us on Facebook.

SINGAPORE: Singapore companies must respond quickly to the changing business environment while also taking innovation and technology seriously, said Finance Minister Heng Swee Heat on Wednesday (Apr 17).

He was speaking at the two-day Bridge Forum CEO Summit in San Francisco, organised by the Economic Development Board (EDB) and GIC, which manages Singapore’s foreign reserves.

The forum connects their partners in Asia with networks and business leaders in Silicon Valley to discuss the subject of tech disruption.

When asked by the session’s moderator, EDB managing director Chng Kai Fong, what Singapore can do better in, Mr Heng said: “I hope that our companies take innovation and technology seriously.”

He added: “The speed of technological changes, the speed that others are changing business models means that if you don’t change, you’re going to be left behind. So it’s quite critical, first and foremost, that our companies are really going out to all these changes quickly.”

At the same time, Singapore must ensure that workers are not left behind amid the rapidly changing environment, Mr Heng said.

He pointed out that Singapore has embarked on a push for skills upgrading and lifelong learning.

“Lifelong learning is not just a slogan. It’s something we are working very hard on,” said Mr Heng, who also chairs the Future Economy Council.

He noted that such efforts have been made possible with the tripartite relationship between businesses, unions and the Government.

The unions take a “very supportive” approach, Mr Heng added. “They work with companies and say, what are the changes that are needed and how do I prepare our workers. If our workers are going to do that, will they benefit?”

“If you look at stories of successful transformation around the world. It is always that the people must believe that the change is good for them, because otherwise you’ll get a strong reaction against the change,” he said.

“In Singapore, ever since our founding, we have the tripartite relationship – businesses, unions and workers and the Government. It is important to have all three elements working together.”

He told the audience: “If you look at all the backlash against globalisation, it is in all the places where workers feel that their interests have been compromised and not taken care of. 

“In an age where technology can replace many of these simple jobs, it is even more important for us to focus our minds on this.”

SINGAPORE: By 11am on Wednesday (Apr 17), the official opening day of Jewel Changi Airport, the queue outside Shake Shack had grown so long that it snaked around an atrium, split into four barricaded sections. 

Signs were parked along the queue informing diners they could only purchase up to five burgers and flat-top dogs per order at the American burger chain’s first outlet in Southeast Asia. ​​​​​​​

First in line were customers Justin Zheng and Hiroki, who wanted to be known only by his first name. They told CNA they had been queuing since 4.30am that morning.

READ: From garden cart to Garden City – Shake Shack goes full circle with Singapore debut

READ: Hungry for more – A&W to open second Singapore outlet in June, eyes “important” halal market

“We’re kiasu Singaporeans,” said Mr Zheng. “First day, first opening, first Shake Shack – kiasu Singaporeans.” 

Unlike Shake Shack, which opened for the first time at 10am on Wednesday, A&W had been open even during Jewel’s preview period. It was reported that customers queued an average of three hours for their food. 

At around 11am on Wednesday, there were more than 50 people queuing at the fast food restaurant – A&W’s first in Singapore in more than a decade. 

One customer, who declined to be named, said she had been waiting since 7.45am as she thought A&W was going to be open 24 hours. 

“I feel that they should have told patrons that they were going to open at 10am, then we would have come at the right time,” she said. 

She told CNA that she visited Jewel during the preview period, but did not manage to buy from A&W due to the long queues.

People were not just queuing for the food. One visitor, 26-year-old freelance photographer Neo Wei Xiong, told CNA he had been in the line for the Pokemon Center since about 11pm Tuesday night. 

“It’s the first time the Pokemon Center will be in Singapore and I want to see the item exclusive to Singapore,” he said, adding that he had not managed to get tickets to the Jewel preview. 

The Pokemon fan said he had spent most of Tuesday night waiting outside Jewel, as shoppers were only allowed in the mall at 6am. 

Earlier that morning, most of the visitors were crowded around the HSBC Rain Vortex, the world’s tallest indoor waterfall. 

Two of them, Ms Cynthia Winna Widya Putri and Ms Yenita Shanty Veronika Sianturi, had just flown in from Indonesia. 

“We wanted to see Jewel because it’s the (first day of it opening) and we are so excited,” said Ms Putri.

SINGAPORE: Sitting in its first Singapore outlet at Changi Airport, it is hard to imagine that just 15 years ago, Shake Shack was a hot dog stand in Manhattan’s Madison Square Park.

On Wednesday (Apr 17), the 180-seater restaurant joined more than 100 F&B outlets as tenants of Jewel Changi Airport, an award-winning S$1.7 billion lifestyle complex built as an extension of the world’s best airport.

The brand plans to open 10 outlets in Singapore in the next five years. Next month, there will be a Shake Shack outlet in Manila and by July, Shake Shack hopes to launch its 100th licensed outlet.

READ: Creating a “mythical garden” was inspiration behind Jewel Changi Airport – Moshe Safdie 

READ: Piece de resistance? Jewel strengthens Changi Airport’s grip on best airport crown

How did Shake Shack evolve from a humble street food cart to a titan in the world of burgers and milkshakes? The American brand has become so popular that those without a Shake Shack at home have been known to plan their travel itineraries around a visit to one of its restaurants.

“I think Shake Shack’s had so much of the success it’s had because it was born from a truly authentic place,” its head of international expansion Michael Kark told CNA on Tuesday. 

“So many brands in today’s world come out of a boardroom setting. Shake Shack was nothing like that at all. It was born out of a park in New York City with the goal of trying to help elevate a park that had become really run down and kind of a place you would walk around rather than through.

READ: In pictures – First look inside Jewel Changi Airport

“When I think today about what our fans around the world connect with about Shake Shack, so much of it is really that. Shake Shack has incredible soul.”

In a way, Shake Shack is coming full circle with its Jewel outlet. Some leafy foliage from the Shiseido Forest Valley peeks into its alfresco dining terrace. 

You cannot see much of it, but you can hear the whooshing sound of the HSBC Rain Vortex, the world’s biggest indoor waterfall just a few steps away. It’s an elevated version of the original Shake Shack dining experience in New York.

“I think what makes this location so special, with all the beautiful greenery and the way that you can peek out on to the fountain, reminds me a lot of sitting back in Madison Square Garden, in the middle of the trees, in the middle of summertime enjoying a ShackBurger and a beer,” said Mr Kark.

But there is one caveat – this is not quite the famed streetside experience that Shake Shack has been known for. After six years researching the market, Mr Kark said “streetside” takes on a whole different meaning in Singapore.

“Back in the early days of Shake Shack, all our outlets were on the street because there were not many malls in New York. In fact, today, we only have two mall outlets in the city. Malls are not really a piece of Manhattan culture,” he said.

“But then we went to places like Dubai, where we opened our first international outlet, and realised how important malls were … For example, after spending some time in Singapore, you realise that you can be walking on the street and be like, ‘Where is everyone?’. Then you go one level down, to the MRT station, and everyone’s there.

“The high street means something different in Singapore than it does for us back home. It means something like this amazing project, Jewel,” Mr Kark added.

DOING BUSINESS IN THE GARDEN CITY

Ten outlets in a small market like Singapore may not sound like an easy feat, but it is certainly not a pipe dream. Mr Kark, who first started working in the project in 2013, said Singapore “has been a really refreshing market”.

“In a lot of countries, you will find that things are not as well-defined. In Singapore, however, the legislation is very clear; this is what you can bring in, this is what you can’t, this is the way that you go about doing it, this is what can be localised, this is what needs to be imported. In a lot of countries, there’s a lot of grey. You can ask two different people and get two very different answers,” he said.

“I think that’s always been the best part about Singapore. Everything works, everything’s very functional. It makes you feel very comfortable and lets you know that you’re doing things the right way,” he added.

Mr Kark hopes to draw people to the restaurant for the “authentic New York experience”, which is why Shake Shack has no firm plans to join up with food delivery apps in the near future. 

The menu will also retain 90 per cent of the “core menu that’s the exact New York experience that we want to bring people through”, he said, using meat from the US and buns brought in from South Korea. 

But there are also a handful of shout-outs to the brand’s new home.

On the second floor of the restaurant is a large mural featuring the Jewel site by local illustrator Natalie Kwee.

The menu also features a total of four items – all of them desserts – that were created for Singapore. The Pandan Shake is a vanilla frozen custard drink blended with pandan and coconut, and topped with gula melaka crumble. 

The other three are local versions of Shake Shack’s signature frozen custard ice-cream, Concrete: Shark Attack is a chocolate custard mixed with brownie, fudge, chocolate chunks and chocolate sprinkles, It Takes Two To Mango is a vanilla custard with mango, sago pearls, shortbread and freeze-dried fruit, and Jewela Melaka is a vanilla custard with coconut salted caramel, chocolate chunks, shortbread and of course, gula melaka.

Not only are these “flavours Singaporeans know and loved from their childhood”, they are also the result of collaborations with popular local businesses, according to Mr Kark. The brownie in Shark Attack is sourced from Plain Vanilla and the chocolate chunks from homegrown brand Lemuel. One of the Shack’s shakes will also feature coffee extract from Common Man Coffee.

“We make amazing frozen custard, but we’re not necessarily bakers and we don’t necessarily make the best brownie or have the best coffee extract, so we go to people like Common Man and find the most interesting and local versions of products that we want to incorporate into our food and mix them together.

“So we have this yin and yang balance, if you will, of what’s New York and what’s local,” said Mr Kark.