Analysts upgraded Hyflux's ratings despite its power strategy: Defence

Davinder Singh cites 5 recommendations, only one of which was to sell firm's shares

- Tay Hong Yi Correspondent and Grace Leong Senior Correspondent

By scrutinising the March 2011 project announcement for the Tuaspring desalination plant, financial analysts could work out that Hyflux would need to sell a large part of excess power generated to the grid to meet profit targets.

Nonetheless, most analysts maintained or upgraded their outlook on Hyflux's share price based on bullish financial projections, which were published in reports that investors could access.

On Sept 10, these reports formed a key plank of the defence's case in the criminal trial involving former Hyflux chief executive Olivia Lum. She is facing charges of non-disclosure of material information in the March 2011 announcement, as well as in the issue of preference shares the following month, relating to Hyflux's entry into power generation.

To illustrate his point, Senior Counsel Davinder Singh drew on five research reports from DBS Bank, Kim Eng, Credit Suisse, JP Morgan and Indian financial services company IIFL, all released within days of the announcement.

He was continuing his cross-examination of the prosecution's second witness, Ms Winnifred Heap, who used to head corporate communications and investor relations at the defunct water treatment provider.

He began by asking Ms Heap what information an analyst covering Hyflux would need to determine the excess electricity capacity of a plant like Tuaspring, and to project the impact of the sale of electricity on both revenues and profits.

"The math can only be done if you consult a water desalination specialist who can tell you the typical (electricity) consumption of such a plant," Ms Heap said.

However, in response to a follow-up question from Mr Singh, she acknowledged that consulting such an expert is not required if the information is publicly available.

Afterwards, Mr Singh asked her the extent of industry knowledge an analyst covering Hyflux could be expected to have, as well as the role of an analyst in investment research.