Hyflux

[winston]

And this one is up 6% today. Maybe the impairment charges were less than expected.

[winston]

DJ MARKET TALK:Hyflux May Rise On Higher Div, Record FY08 Net Pft

0012 GMT [Dow Jones] Hyflux (600.SG) may edge up, with higher FY08 dividend payout mitigating weaker 4Q08 bottomline. Earnings off 41.7% on-year at S$13.4 million due to impairment charges related to trade receivables, but FY08 net profit still +79% at record S$59.0 million due to strong revenue growth.

Sales for FY08 at S$554.2 million vs S$192.8 million year earlier on higher contributions from government projects in China, Algeria, which offset lower revenue from industrial segment caused by economic slowdown in China (country accounts for 54% of total revenue).

Water treatment firm proposing final dividend of S$0.0343/share vs S$0.0189/share year earlier. Drop in overall net margins to 10.7% from 17.1% led by lower margins from municipal projects, the company's main revenue driver. Still, company's longer term prospects eyed bullish given China's recent stimulus package, part of which devoted to boosting country's water, infrastructure sectors.

Stock closed +0.6% at S$1.66 yesterday; resistance tipped at 100-day moving average of around S$1.76.

[winston]

DJ MARKET TALK: Hyflux +5.4%; Industrial Ops May Weigh - Brokers

0157 GMT [Dow Jones] Hyflux (600.SG) +5.4% at S$1.75 on improved dividend payout, record FY08 earnings. "Notably, dividends surprised on the upside," says JPMorgan, which has Overweight call; water treatment firm to pay S$0.0343/share vs S$0.0189/share previous year, after reporting 79% jump in FY08 net profit to S$59.0 million on strong revenue growth.

Still, JPM cuts target to S$2.50 from S$3.00 to reflect weaker contributions from industrial segment, which faces increased competition in China.

Credit Suisse also trims target, to S$2.39 from S$2.52, partly on concerns over industrial business, but keeps as Outperform.

With 100-day moving average of S$1.76 tested in early trade (stock touched S$1.77), next resistance likely at S$1.80, last tested Feb. 12

[winston]

Singapore Hot Stocks-Hyflux jumps on strong profits

SINGAPORE, Feb 19 (Reuters) - Water treatment firm Hyflux rose as much as 6.6 percent on Thursday after posting a near-80 percent jump in annual net profit, but some analysts cut their price targets, citing concern over a weak industrial sector.

JPMorgan, which rates Hyflux as "overweight", said there was potential gain from its Build-Own-Transfer plants divesture, adding that a portfolio of 9 plants initially priced at S$180 million ($117.5 million) was in the pipeline.

"The price tag could be potentially revised upwards depending on the state of completion and operating levels of the plants," JPMorgan said in a research note.

But JPMorgan cut its Hyflux price target to S$2.50 from S$3.00 previously.

Credit Suisse, which rates Hyflux as "outperform", reduced its target price to S$2.39 from S$2.52, citing industrial sector weakness.

A local dealer said Hyflux's strong revenues were impressive at a time of recession.

"The water business is not high risk, except for higher gearing from time to time. But Hyflux has proven itself in the long-run without putting too much strain on the business," he said.

By 0415 GMT, Hyflux was up 6 percent at S$1.76, outperforming a 1 percent drop on the benchmark Straits Times Index <.FTSTI>.

[winston]

From CIMB:-

Hyflux Ltd (S$1.65) -4Q08 Results- Open the flood gate

Core profit above expectation. FY08 core net profit of S$59.8m came in within consensus and was 16% above our full-year forecasts. The results were largely underpinned by MENA region, which accounted for 40% of total revenue, driven by the with progressive EPC recognition of Tlemcen and award of Magtaa.

Record revenue of S$554.2m (+226% yoy) anchored by Municipal segment. Though no figures were given, we estimated that the top-line include about S$10m related to the three water treatment plants divested into Hyflux Water Trust (HWT) in 4Q08.

Revenue from municipal sector continued to shine as it increased more than five times from to S$476.8m (86% of total revenue), attributable to the good progress made both in China and Algeria. However, this was offset by industrial sector, which disappointed with turnover of only $76.4m (-25% yoy), as a result of the economic slow down in China.

Margins will trend lower going forward. Spike in cost resulted in gross margin slipping to 36% in FY08 (vs. 37.6% in FY07) as a result of higher raw material and consumables (+262% yoy). The group plans to increase headcounts in FY09 as it forged its presence in activities it engages in, this would add further pressure to margins.

Going forward, the continued shift of sales composition from Industrial to Municipal activities will result in
gradual compression of gross and net margin.

Developments. Hyflux disclosed that its EPC order book sits pretty at S$335m, even though this figure excludes its three desalination projects. Divestment of the Yangkou Rudong Wastewater treatment plant into HWT is likely to happen only in 2H09.

Construction of the Magtaa plant in western Algeria is scheduled to be completed in 28 months’ time once the project financing is completed.

EPS forecasts adjusted; target price reduced from S$3.38 to S$2.66, still based on sum-of-the-parts valuation. Our FY09 forecast is reduced by 3.8% due to lower margin assumptions, but we lifted our FY10 estimates by 7.5% higher on revenue recognition. We also introduce FY11 estimates. Hyflux well position to weather the economic turmoil largely due to the natural of its municipal activities, pump-primed by governments’ effort in reviving economic growth through infrastructure projects. Maintain Outperform.

[winston]

Not vested. From DBS:-

Earnings delivery is crucial
FY08 was a record year for Hyflux in terms of operating performance and orderbook growth. This year, the
challenging climate and limited funding will inevitably suppress orderbook growth. But, we believe Hyflux can
still make another record in FY09 if they can manage costs and execute well on the S$1b worth of projects in
their existing portfolio. Maintain Buy, TP S$1.96.

4Q08 results broadly in line. Sales of S$179m exceeded our forecast of S$108m due to stronger
municipal, partially offset by lower industrial sales. But, operating margin was lower at 13.4% compared to our 17% forecast because of higher selling costs. Coupled with a S$6.9m provision for trade and receivables for industrial customers, net profit of S$13.4m (-42% y-o-y) almost matched our S$14.2m projection. Gearing remained relatively flat at 0.54x. The company proposed a doubling in dividend to 3.43 Scts, translating to 2% yield.

Earnings visibility secured. Notwithstanding the challenging environment, Hyflux has reasonable revenue
and profit visibility for the next two years, underpinned by S$1b of order backlog. Of which, 50% is expected to be recognized in FY09. In view of the abundant opportunities in Northern China and Algeria, management remains confident of growing net orderbook by 20% annually. We have assumed new EPC wins of S$270m in FY09 (FY08: S$819m) and S$27m of this to be realized this year.

FY09 earnings trimmed by 7%, to account for lower margin assumption. Consequently, our SOTP-based
target price is revised to S$1.96, translating to 18% upside. Maintain Buy

[winston]

FY08 results: A bright spark amidst the gloom â–¼Price: S$1.66
Price Target: S$2.50
Previous: S$3.00

• Hyflux reported FY08 earnings of S$59MM (+79% Y/Y), which was 7% ahead of our estimates. Notably, dividends surprised on the upside with DPS of 3.43 cents, which was 9% higher than our forecast.

• Growth powered by municipal projects: Growth continues to be driven by municipal sales (+436% Y/Y) from both China and Algeria as we continue to see progressive recognition of EPC contracts in both regions. The 200,000m3/day Tlemcen desalination plant is about 60% completed, with the 500,000m3/day Magtaa plant expected to achieve financial close by 1H09. MENA region alone accounted for 40% of revenue. EBIT for
municipal work was up 176%. EPC orderbook is at a high of S$1.15B.

• Industrial sales a mild drag: Industrial sales dipped 25% due to the economic slowdown in China. This resulted in an overall lower margin for the group. Gross margin declined from 45% to 31% while net margin
declined from 19% to 11%.

• Potential upside from BOT plants divestiture: Hyflux has already completed the sale of 4 BOT plants to HWT with the remaining Yangkou Rudong Wastewater Treatment plant to be divested around Jun-09. Total
consideration for the 5 plants was S$88MM. Proceeds for the first 4 plants had been received in Dec-08. There are also another 4 BOT plants provided under the ROFOAR to HWT which are expected to be divested at a later date.

Initially, the full portfolio of 9 plants was valued at S$180MM, implying a S$92MM value for the final 4 plants in the ROFOAR. However, the price tag could potentially be revised upwards depending on the state of completion and operating levels of the plants.

• We maintain our OW on Hyflux given its encouraging growth outlook amidst the challenging economic environment. We reduce our Dec-09 SOTP PT to S$2.50 as we accord a lower P/E of 6x to the industrial, consumer and oil recycling businesses on weaker outlook in industrial sales and still insignificant profitability in the consumer and oil recycling segments.

With earnings locked in by the strong EPC orderbook to be recognized over the next 3 years, key downside risks to our PT would be:-
(1) weak project execution, and
(2) sudden surge in raw material prices

[winston]

HYFLUX - Singapore water treatment firm Hyflux said its sales of industrial products were likely to be flat to negative this year, but it saw no cancellations in its S$1.15 billion orderbook for water plants.

[helios]

HYFLUX - it saw no cancellations in its S$1.15 billion orderbook for water plants.

Was in the Forum yesterday.

1. minister Yaccob highlighted Hyflux's Tuas plant is an example of capabilities building and transfer, and how it clinched the nigeria desalt plant contract ...

2. watch for news on activated sludge to biomass energy conversion initiative upcoming in june/ july ... it was said to there is 1 company to open in jurong island on this note ...

3. it was expressed that singapore will not continue the 2011 agreement, and took a status quo position for the 2061 agreement.


if i take a long term view, maybe i should buy some water resources companies ...

[winston]

HYFLUX - Credit Suisse downgraded water treatment firm Hyflux to "neutral" from "outperform" and cut its target price to S$0.40 from S$0.60, citing lower volume assumptions, higher effective tax rates and a slowdown in the Chinese economy.