Hyflux 6% Class A preference shares - To Hold or to Stag?

Hyflux had announced balloting results for the public portion of the 6% Class A preference shares. As expected, due to the overwhelming demand, the Company had exercised the option to upsize the offering to S$400,000,000. Similar to the DBS preference shares balloting results earlier, everyone who applied was allocated at least some shares, with those applying for higher range being allocated more.


We at Kiasu Investor (KI), had applied for 1100 shares and a quick check of the refund monies in our bank account verified that we have indeed been allocated 180 shares. Trading in the shares is expected to start from 9.00 a.m. on 26 April 2011, and the shares will be traded in board lots of 10 shares. Based on historical performance of DBS preference shares, we expected share price for the first two weeks to be trading relatively close to offer price around the $101 to $102 range. Subsequently, once the short term "overhang" has been cleared, the price may be able to move slightly higher.

With trading expected to start soon, the big question on investors' mind would be whether to "Stag" or to hold on to the shares for its 6% payout (not guaranteed). Even though the 6% p.a. payout looks relatively attractive to the general public who are looking for "fuss-free" investment that are not exceedingly risky, we remained convinced that we should be focusing our funds on investments that yield even higher returns through active monitoring and management (using Kiasu Analysis). Hence we will be looking for an appropriate opportunity to "offload" our allocation. However, we do note that this is just a matter of "preference" (no pun intended) and there is absolutely nothing wrong and that we have many friends who are more than happy to just hold on for the semi-annual payouts. (note the dates 25 April and 25 October for those keen on applying Kiasu Investing Rule #2)