Hyflux

OCBC on 3 Aug 2012

Hyflux Ltd saw 1H12 revenue +66% to S$329.3m, meeting 56% of our FY12 forecast, while net profit rose 15% to S$25.2m, or 39% of our full-year forecast. We deem the results to be in-line as Hyflux typically achieves 40% of its earnings in the first half. It also declared an interim dividend of 0.7c/share, up from 0.6c last year. Current order book stands at S$1.6b, but the achievement of financial close of its Dahej desalination project in India could bump it up to S$2.2b (we expect it to be more of a FY13 story). As results were mostly in line with our expectations, we maintain our HOLD rating and S$1.35 fair value (18x FY12F EPS).

2Q12 results in-line
Hyflux Ltd saw 2Q12 revenue jumping 71% YoY and 37% QoQ to S$190.4m, buoyed by its ongoing projects in Asia. Net profit climbed 21% YoY and 129% QoQ to S$17.5m. For 1H12, revenue grew 66% to S$329.3m, meeting 56% of our FY12 forecast, while net profit rose 15% to S$25.2m, or 39% of our full-year forecast. We deem the results to be in-line as Hyflux typically achieves 40% of its earnings in the first half. It also declared an interim dividend of 0.7c/share, up from 0.6c last year.

Tuaspring likely be completed by end 2012
92% of 1H12 revenue came from the municipal sector, versus 84% in 1H11; Asia (ex-China) also now make up 72% of revenue, with the bulk coming from Tuaspring Desalination (TSD) project. Hyflux has made excellent progress on the construction, and we understand that there is a good chance that TSD could be substantially completed by end-2012, way ahead of its Jul 2013 due date. As such, we can expect some S$500-600m of EPC revenue to be booked in FY12. The rest of the S$1.05b contract would be booked in 2013 to 2014 for the power plant construction.

Slowly relooking at MENA
With Magtaa Desalination project nearly completed, the MENA contribution has fallen to just 6% of 1H12 revenue (versus 44% in 1H11). But management believes that opportunities are emerging once again, given the acute lack of water there. We understand that it is currently looking at a project in Oman (tender results likely due in Oct) and another one in Saudi Arabia.

Maintain HOLD with S$1.35 fair value
Current order book stands at S$1.6b, but the achievement of financial close of its Dahej desalination project in India could bump it up to S$2.2b (we expect it to be more of a FY13 story). As results were mostly in line with our expectations, we maintain our HOLD rating and S$1.35 fair value (18x FY12F EPS).