Hyflux Ltd posted an uninspiring 3Q14 showing, with revenue down 46% YoY to S$101.0m, reflecting the timing of project commencements so far; reported net profit fell 55% to S$11.3m, which also included a tax credit of S$5.2m. Still, we did see some sequential improvement, as we estimate that core earnings came in around S$6.6m, versus a net loss of S$23.1m in 2Q14. YTD, revenue fell 40% to S$270.0m, meeting 63% of our full-year forecast, while reported net profit jumped 117% to S$110.6m, estimated core loss came in around S$20.8m, or about 39% of our FY14 forecast. But the company warned that the last quarter is likely to be slow, given the mixed global economic outlook; also does not expect to achieve financial close for its Dahej project in India. While the group continues to actively pursue municipal and industrial projects in select markets in MENA, Asia and Latin America, we think that the lack of sizable project wins over the past year and lacklustre recurring income stream would work against the company in the near term. Maintain SELL with an unchanged fair value of S$0.75.
Uninspiring 3Q14 showing
Hyflux Ltd posted an uninspiring 3Q14 showing, with revenue down 46% YoY to S$101.0m, reflecting the timing of project commencements so far; gross profit also slipped 48% to S$60.2m. As a result, reported net profit fell 55% to S$11.3m, which also included a tax credit of S$5.2m. Still, we did see some sequential improvement, as we estimate that core earnings came in around S$6.6m, versus a net loss of S$23.1m in 2Q14. YTD, revenue fell 40% to S$270.0m, meeting 63% of our full-year forecast, while reported net profit jumped 117% to S$110.6m, estimated core loss came in around S$20.8m, or about 39% of our FY14 forecast.
Outlook remains very cautious
Going forward, management remains cautious about its business outlook, citing the mixed economic conditions, thus warning that the 4Q to remain slow. It adds that the delay in connecting the Tuaspring power plant to the national power grid will continue to have operating cost implications over the next few quarters: it now expects the connection to be completed by end 2015 instead of mid-2015 as originally guided. Last but not least, management notes that it does not expect to achieve financial close for the Dahej project before year end, attributing the delay to the change in the Indian government; it also did not give any guidance of the timeline.
Still pursuing projects in select markets
Still, Hyflux says it will continue to actively pursue municipal and industrial projects in select markets in MENA, Asia and Latin America; we understand that they have submitted bids for two mega projects (worth a few hundred millions each) in MENA, but would need a few quarters before the tender results are known.
Maintain SELL with S$0.75 FV
In the near-term, we think that the lack of sizable project wins and lacklustre recurring income stream would work against the company. Maintain SELL with an unchanged fair value of S$0.75.
Hyflux Ltd posted an uninspiring 3Q14 showing, with revenue down 46% YoY to S$101.0m, reflecting the timing of project commencements so far; gross profit also slipped 48% to S$60.2m. As a result, reported net profit fell 55% to S$11.3m, which also included a tax credit of S$5.2m. Still, we did see some sequential improvement, as we estimate that core earnings came in around S$6.6m, versus a net loss of S$23.1m in 2Q14. YTD, revenue fell 40% to S$270.0m, meeting 63% of our full-year forecast, while reported net profit jumped 117% to S$110.6m, estimated core loss came in around S$20.8m, or about 39% of our FY14 forecast.
Outlook remains very cautious
Going forward, management remains cautious about its business outlook, citing the mixed economic conditions, thus warning that the 4Q to remain slow. It adds that the delay in connecting the Tuaspring power plant to the national power grid will continue to have operating cost implications over the next few quarters: it now expects the connection to be completed by end 2015 instead of mid-2015 as originally guided. Last but not least, management notes that it does not expect to achieve financial close for the Dahej project before year end, attributing the delay to the change in the Indian government; it also did not give any guidance of the timeline.
Still pursuing projects in select markets
Still, Hyflux says it will continue to actively pursue municipal and industrial projects in select markets in MENA, Asia and Latin America; we understand that they have submitted bids for two mega projects (worth a few hundred millions each) in MENA, but would need a few quarters before the tender results are known.
Maintain SELL with S$0.75 FV
In the near-term, we think that the lack of sizable project wins and lacklustre recurring income stream would work against the company. Maintain SELL with an unchanged fair value of S$0.75.
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