HYFLUX is one of the seven pre-qualified groups to remain in the running for the independent water project (IWP) in Oman. Partnering with Hyflux are Mitsui Corporation and Al Tahir Group.
We believe Hyflux stands a good chance of winning the project, estimated at US$350 million-US$400 million, given its strong track record in large-scale desalination projects in Algeria and Oman. Apart from financial support from Mitsui, Al Tahir, an established and leading construction & engineering conglomerate in the Sultanate of Oman, would provide better domain knowledge and network.
The IWP is to be constructed next to the existing Ghubrah power and desalination plant. The first phase will produce 138,000 cubic metres per day, with capacity to increase to 191,000 cubic metres per day by 2014.
We do not have a confirmation of the tender results date but considering that this plant has to be ready by 2013, we believe construction should begin in 2012 and hence the tender results should be concluded over the next couple of months.
Year-to-date, Hyflux has already met our new win assumption of S$500 million with the Dahej project (engineering procurement and construction contract of US$420 million) in India. Hence, any new wins here on will provide upside to our FY2013/14 forecast earnings.
We have good visibility for Hyflux's FY2012 earnings, maintain "buy". We do not foresee any significant earnings surprises as FY2012 will be driven by Tuaspring (S$1.05 billion), government-backed and due for completion in 2013. Our forecast assumes 50 per cent completion in 2012. Earnings upside could come from faster than expected execution of Tuaspring or any other new contracts.
BUY
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