Hyflux

[winston]

DJ MARKET TALK: CS Cuts Hyflux Target To S$2.33; Keeps Outperform

0822 GMT [Dow Jones] STOCK CALL: Credit Suisse cuts Hyflux (600.SG) target price to S$2.33 from S$2.39, based on sum-of-parts valuation, after reducing FY09-10 earnings forecasts by 1%-2%. Lowers target for Hyflux Water Trust (D7TU.SG) to S$0.40 from S$0.60.

Notes lapse in new projects secured in China due to longer duration in project selection process, need to secure financing for jobs. But keeps Outperform call, citing orderbook of S$1.14 billion to be recognized over next 2.5 years. Stock +1.4% at S$1.49.

[helios]

HYFLUX
Achieves financial close for Algerian reverse osmosis desalination plant

Yaccob likes to cite this Algerian plant as an example ...

source: http://info.sgx.com/webcoranncatth.nsf/ ... penelement

[winston]

From OCBC:-

Hyflux: Crystal Clear Choice

Leading environmental company in Asia. Hyflux Ltd (Hyflux) is one of Asia's leading environmental companies, offering integrated waste-water
treatment solutions and services using its proprietary membrane technology. Hyflux has its operations and projects mainly in Singapore, China, the Middle East and North Africa (MENA) and India. Based on its FY08 results, Hyflux derived 54% of its revenue from China, 40% from MENA and 6% from Singapore and other regions.

Flagship projects in Singapore include the nation's first S$200m desalination plant; in China, they include a 100k m3/day desalination plant in Tianjin; in Algeria, the company is involved in building a S$632m 500k m3/day desalination plant.

Focus on municipal business. Increasingly, Hyflux has also turned its attention to the municipal sector for growth. This comes as no surprise as most major environmental projects are initiated by the public sector. In addition, governments typically use these major projects as means to pump prime their economies during recessions; China has already launched a massive RMB4t aid package to stimulate its economy where a large portion will be spent on environmental protection. However, due to the lower risk associated with these projects, gross margins are typically much lower (as much as 10 percent points less).

Growing order book but lumpy revenue stream. Currently, Hyflux is sitting on an impressive order book of S$1.5b (end 2008), up from the S$1.1b as of end 2007. Going forward, management remains confident that it can continue to grow its order book by some 20% this year. It is also cognizant of the fact that its EPC business, which contributes some S$1.1b to that order book, can be lumpy in terms of revenue recognition, and is thus working to increase its O&M business, which is more stable as it provides recurring revenue over the projects.

However, funding for these projects could remain a concern, given the tight credit situation. Fortunately, management is able to alleviate this by adopting an "asset light" strategy where it constantly monetizes its completed projects to finance future projects.

Initiate with BUY and S$2.03 fair value. While the outlook for the water treatment industry has improved, we believe that not all companies will benefit equally - only those with superior technology, proven track record and strong financial position would emerge victorious. We see Hyflux as one of these victors. We initiate coverage on Hyflux with BUY and a DCFbased fair value of S$2.03. (Carey Wong)

The analyst/analysts who wrote this report holds 1.875 shares in the above security.

[winston]

Not vested. From Kim Eng:-

Hyflux – Initiating Coverage (James KOH 64321431)
Previous day closing price: $1.65
Recommendation: Buy (maintained)
Target price: $2.13 (maintained)

Filter the great from the good

Hyflux was listed in Jan 2001 with a market cap of $54m, a net profit of $6.4m and an orderbook of merely
S$5m. Within eight years, the Group has progressed from being just a provider of water treatment systems
to a world-class solutions provider for municipal and industrial water projects, including desalination. A
shareholder who had stayed invested since the IPO would have more than 15 times his money by now!

Algerian adventure propels Hyflux into the big leagues
After its initial desalination project win in Tlemcen, Algeria, in 2006, Hyflux followed that up in April 2008 by
winning the $600m project to build the world’s largest desalination plant in Magtaa, Algeria. This project
was won in a highly competitive international bidding situation, thus validating Hyflux’s capabilities in the
global arena.

No turning off the ‘tap’ here!
While the trend in this industry is tending towards build-operate-transfer (BOT) projects, they are inherently
capital-intensive. Amongst its peers, Hyflux has the best financing platform. With diversified debt facilities
and the option of divesting its investments to Hyflux Water Trust, the Group is in an enviable position,
especially in the current global credit crunch.

Navigating through choppy waters
Execution risks exist, particularly in the Magtaa project, due to the sizeable exposure. An inability to divest
its BOT projects may impair the Group’s ability to recycle capital and fund new projects, thus hindering its
EPC earnings growth, which is still the main growth driver.

From spring of hope to fountain of wealth
We think the Group’s O&M orderbook, which would be recognised over the next 25-30 years, could
increase exponentially from $335m to over $2.5b by FY11. This will literally transform Hyflux from a spring
of hope into a fountain of wealth as its earnings base becomes more recurrent. We initiate with a BUY and
a price target of $2.13 based on SOTP.

[helios]

see if the short-term trend can engulf that longish, bearish candle in Nov ... maybe by end of this year?!

all we know yaccobs is in saudi arabia ... & hyflux desalt plant is there ...



- Weekly chart reviewed on 10-Apr'09

[kennynah]

very uninteresting counter to me.. for the risks involved...the upside potential bores me to death....

[Mr_Boring]

everytime, i think i missed this boat. It surprises me. Not vested but been watching for many years.

[helios]

i'll get some of this when the price falls < 2.0 ...

[winston]

i'll get some of this when the price falls < 2.0 ...

Hi Lady with the Midas Touch,

May I know why you would be buying this counter ?

Thanks and take care,
Winston

[helios]

Winston dear,

I'm stocking this up as a water commodities play; remembered that jim roger also likes water counters.

good fengshui perhaps?

i didn't act on this during april period; hopefully, it's not too late & we should see some levels like 1.7 - 1.55 ideally ...