Hyflux

[helios]

November 20, 2009, 12.51 pm (Singapore time)

Hyflux to invest $120m to expand operations

By TEH SHI NING

SINGAPORE - Hyflux will invest S$120 million over the next three to five years to expand its global headquarters and build a new membrane manufacturing facility.

The water treatment company said on Friday that its new 'nerve-centre for global operations', named the Hyflux Innovation Centre, will be built on a 1.7 hectare- site in Bendemeer and will have a gross floor area of about 32,000 square metres when completed.

Hyflux also said that it will be expanding its production capacity in response to anticipated market demand.

Its new Hyflux Production Hub, to be built on a 7.7 hectares site in Tuas, will have a gross floor area of over 75,000 square metres when fully completed. It is expected to raise production capacity by several-fold.

Was discussing this earlier with someone. Several questions came to my mind.

Q1: Who owns the Bendemeer property site? Based on a 99-years lease from government, right? Hear-say only.

Q2: What is so unique about their membrane technology? They are now scouting for other complementary (perhaps, incremental) technologies that can be used to extend the lifecycle of their membranes, such as anti-foul technology, aeration technology? Do they really need to be so "unique"? Need not. Hear-say only.

Q3: Why do they need to build their innovation Hub in Singapore? Why not in China? Could it be that they realised that their IP rights would be "stolen", and lost their competitive edge in Asia? Look at Creative Technologies learning curve ...

I would definitely sit up now and re-think about an entry price for this counter. When will the opportunity knock? Definitely, not during the hype now ...

AOR.

[winston]

From Kim Eng:-


Hyflux – Company Update (James KOH, DID: 6432 1431)
Previous Day Closing price: $3.05
Recommendation: BUY (maintained)
Target price: $3.52 (maintained)


Expansion plans to keep further abreast of competition

During and subsequent to its 20th anniversary gala dinner last week, Hyflux unveiled new investment plans for a new innovation centre and production hub in Singapore. This is expected to cost about $120m over the next three to five years. We see this as another testament to Hyflux’s DNA of constant progress.


Hyflux Innovation Centre

This will also house its global headquarters, is to be developed on a 1.7 hectares site located in Bendemeer, Singapore. The centre will spearhead research activities and collaborative efforts with strategic partners.

Since its founding, Hyflux has always retained its commitment to research, spending between 5-8% of revenue each year on R&D. The Group already has the largest research team in Asia-Ex Japan.


Hyflux Production Hub

To support its larger project requirements and anticipated market demand, production capacity in terms of membranes and systems will be expanded. The new Hyflux Production Hub will be located at a 7.7 hectares site in Tuas, Singapore. This will integrate Hyflux’s production sites and increase production capacity significantly.
Constantly breaking new grounds

Since its founding 20 years ago, Hyflux has been constantly breaking new grounds, being an early pioneer of the use of membrane technology for water plant applications. The Group moved into China very early and has since broken into the lucrative Middle East North Africa Region even against strong odds.


[b]Higher capex, maintain target price of $3.52[/b
]
We adjust our estimates to take into account higher capex, with associated financing costs to be offset by slightly better margins. The Group continues to explore new markets and applications and we do not rule out other rabbits in its hat going forward.

We also expect the Singapore government to continue being supportive of the water sector, having identified it as an international niche.

[kennynah]

yada yada yada....still <$4

[winston]

by financecaptain » Mon Dec 14, 2009 9:45 am

greenhoney wrote:
i almost bought his recommendations (water stocks), and after witnessing what happened to sino env, did some dd, asked a couple of friends in the industry and didnt buy into them. apparently even hyfluxs' technology isnt such a market leader as many chinese companies has the same capabilities and technology.

Waters stocks are never about technologies. Hyflux is like what you call a system integrator in IT. Everyone's capability is about the same.

Like many utilities, it is all about political connections to get good projects.

They are like yield plays as the cash flow returns from each project are like bond returns.

Hence, any upside on each project is from the real estate it is on. Especially so if it is situatied in prime land (for the older projects) and they were acquired at very good rate from the local government (below market).

The land acquired is usuallly much bigger than what the project needs in the first few phases. So that you can benefit from the excess land in the future.

[helios]

Hence, any upside on each project is from the real estate it is on. Especially so if it is situatied in prime land (for the older projects) and they were acquired at very good rate from the local government (below market).

The land acquired is usuallly much bigger than what the project needs in the first few phases. So that you can benefit from the excess land in the future.

the analogy applies for building Ports, right?

Can financeCap cite some specific examples?

[greenhoney]

gee, i know that some of them build then transfer the facilities after a said period based on the contract. but i just to not see the need to wait out for 5-15 years for the real estate yield to come into play.

moreover, sometimes the margins for these contracts are razor thin and if any cash flow problem arises, its the shareholders that will bear the brunt of it.

[winston]

Not vested.

HYFLUX LTD - Water-treatment company Hyflux said it has been served an originating summons by Istithmar World PJSC, a Dubai investment firm, saying the Singapore firm had breached the terms of a warrant subscription agreement made in November 2004. Hyflux said it intends to contest the claim.

Source: Reuters

[winston]

Not vested. From DBS:-

Hyflux is facing legal action from Dubai investment group Istithmar World (IWP) over a warrant subscription agreement entered in 2004 and amended later in 2008.

In the summons, IWP alleged that Hyflux had acted in breach of the warrant instrument, warrant certificate and warrant terms and conditions in respect of a warrant exercise by IWP in late October 2009.

[winston]

Not vested. From Kim Eng:-

Hyflux – Company Update (James KOH DID: 6432 1431)
Previous Day Closing price: $3.56
Recommendation: BUY (maintained)
Target price: $4.10 (upgraded from $3.52)


Strengthening the platform to compete on a global scale

While it has been relatively quiet on the contract winning front, we believe Hyflux has not been sitting still. In the past six months, the Group has formed partnerships with Japan Bank for International Cooperation, Bank of Jiangsu and JGC Corporation.

Plans for a new innovation centre and production hubs were announced. It has also entered new markets in Libya and Oman.


Multiple platforms for financing will accelerate growth

We believe these partnerships are mainly formed to serve as further outlets for financing future projects. Given that water projects tend to be capital intensive, capital management/ capital recycling is important to maintain growth.

We view these developments as positive and believe they are a red herring for contract momentum again.


Another friend to rely on

This latest partnership sees Hyflux forming a joint-venture with JGC Corporation of Japan, a leading global engineering company. This JV will be used as an investment holding vehicle for developing, investing and managing water projects in China. For starters, the Tianjin Dagang Seawater Desalination plant has been injected into the JV.
Istithmar dispute over warrant terms

On 3 January 2010, it was announced that Istithmar (Dubai investment holding company and ex-JV partner) has served Hyflux with an Originating Summons, claiming alleged breach of warrant agreement. The former held warrant which entities it to subscribe for 41.2m shares. While the precise disagreement is unknown, Hyflux refutes these claims.


Stay the course

With the outlook for new contracts improving, we have factored in more contract wins from China and upgraded our earnings by 5%. Our new SOTP target price is $4.11, which implies 30.5X FY10F, below its historical average.

We note that more concrete details on its S$1.2b Libya contracts could improve earnings outlook drastically for FY11.

[millionairemind]

February 24, 2010, 6.05 pm (Singapore time)

Hyflux's FY09 net profit up 27%, order book up 20%

By OH BOON PING

Despite a 5 per cent drop in revenue, water treatment specialist Hyflux reported a 27 per cent rise in net profit to $75 million for the financial year ended December 31, 2009.

Revenue was $524 million, while earnings per share were 14.26 cents - up from 11.25 cents a year ago.

The group was helped by lower costs, and order book grew 20 per cent to $1.8 billion. It declared dividend of 5 cents per share.