Hyflux Ltd posted a much better-than-expected FY11 showing, with revenue of S$482.0m coming 10% and 3% above our and consensus forecast respectively; net profit of S$53.0m was also 7% and 11% above. Hyflux also declared a final dividend of S$0.021, bringing the full-year payout to S$0.0277, down from the S$0.0417 in FY10. Going forward, we expect Hyflux to focus more on Asia, especially Singapore, as the short-term outlook for MENA remains uncertain. In view of the better-than-expected results, we are modestly bumping up our FY12 estimates by 1.4-6.0%. We also raise our fair value from S$1.28 to S$1.55, based on 18x FY12F EPS (versus 15x previously). But given the limited upside, we maintain our HOLD rating.
Better-than-expected FY11 showing
Hyflux Ltd posted a much better-than-expected FY11 showing. Although revenue fell 15% to S$482.0m, following the completion of the mega projects in Algeria, it was still 10% above both our forecast and 3% above consensus. Net profit, down 40% at S$53.0m, was again 7% better than our estimate and also 11% above consensus. But if we strip off the exceptional items, the clean net profit would have been almost spot on our estimate. Hyflux also declared a final dividend of S$0.021, bringing the full-year payout to S$0.0277, down from the S$0.0417 in FY10.
MENA near-term outlook remains soft
According to management, FY11 results reflect the transition of earnings from MENA to Asia, following the completion of its two desalination projects in Algeria. Going forward, Hyflux continues to expect the short-term outlook for the region to remain uncertain although it does see pockets of opportunities. On the other hand, it believes that Asia will continue to be the key region of its growth over the next years. In China, Hyflux is undertaking the expansion and enhancement works at six waste-water treatment plants with an estimated project value of S$88m.
Main focus on Tuaspring
But over the next few quarters, its focus will be on Tuaspring – the 318.5k m3/day desalination plant. Assuming that 90% of the project will be recognized over the next six quarters, Hyflux should be able to book EPC revenue of some S$112m per quarter; we note that 4Q11 revenue came up to almost S$196m. And based on a conservative 10% net margin, quarterly earnings should be around S$12m. Hence at the very least, Tuaspring should account for S$448m of revenue and S$48m of net profit this year.
Raising fair value to S$1.55
In view of the better-than-expected results, we are modestly bumping up our FY12 estimates by 1.4-6.0%. We also raise our fair value from S$1.28 to S$1.55, based on 18x FY12F EPS (versus 15x previously). But given the limited upside, we maintain our HOLD rating.
Hyflux Ltd posted a much better-than-expected FY11 showing. Although revenue fell 15% to S$482.0m, following the completion of the mega projects in Algeria, it was still 10% above both our forecast and 3% above consensus. Net profit, down 40% at S$53.0m, was again 7% better than our estimate and also 11% above consensus. But if we strip off the exceptional items, the clean net profit would have been almost spot on our estimate. Hyflux also declared a final dividend of S$0.021, bringing the full-year payout to S$0.0277, down from the S$0.0417 in FY10.
MENA near-term outlook remains soft
According to management, FY11 results reflect the transition of earnings from MENA to Asia, following the completion of its two desalination projects in Algeria. Going forward, Hyflux continues to expect the short-term outlook for the region to remain uncertain although it does see pockets of opportunities. On the other hand, it believes that Asia will continue to be the key region of its growth over the next years. In China, Hyflux is undertaking the expansion and enhancement works at six waste-water treatment plants with an estimated project value of S$88m.
Main focus on Tuaspring
But over the next few quarters, its focus will be on Tuaspring – the 318.5k m3/day desalination plant. Assuming that 90% of the project will be recognized over the next six quarters, Hyflux should be able to book EPC revenue of some S$112m per quarter; we note that 4Q11 revenue came up to almost S$196m. And based on a conservative 10% net margin, quarterly earnings should be around S$12m. Hence at the very least, Tuaspring should account for S$448m of revenue and S$48m of net profit this year.
Raising fair value to S$1.55
In view of the better-than-expected results, we are modestly bumping up our FY12 estimates by 1.4-6.0%. We also raise our fair value from S$1.28 to S$1.55, based on 18x FY12F EPS (versus 15x previously). But given the limited upside, we maintain our HOLD rating.
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