Hyflux Water Trust (HWT) has reported distributable cash of $4.5 million for the first half of the year. HWT is forecasting full-year DPU of 4.88 cents, reflecting a yield of about 7.7 per cent.
In another front, Bio-Treat is looking into setting up a similar business trust that will contain all its water-related infrastructure assets. Bio-Treat is in dirt need of cash to repay $206 million debts owed to its convertible bond holders.
In comparison to HWT with a reputable sponsor of Hyflux Limited, Bio-Treat has an uphill task to entice investors to park money with its new trust, especially to beat the 7.7% high yield projection with HWT.
The target to raise $250 million to $350 million from the new trust is more than Bio-Treat’s current market capitalization of $250 million. Since they intend to hold 30% of trust upon listing, they are likely overvalued the 70% stake of their assets.
The actual valuation should be at the lower bound or below $200 million in order to push up the yield percentage in view of the market competition. Bio-Treat is unlikely to get excess cash for future investment too after paying their convertible bond holders.
I am not investing in Bio-Treat new business trust if the yield is not significant better then HWT’s 7.7%.
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