Hyflux

[helios]

also, we need to watch out for their combo mix on % china and % mena investments.

could be interesting if the local government is pushing ahead to "positioning" them as singapore home-grown MNCs to middle-east players ...

in this current climate whereby garmen is giving out $$$, you might want to know Singapore is very active to fund projects overseas [middle-east] so long the projects are tied up with a local player over there.

[kennynah]

in this current climate whereby garmen is giving out $$$, you might want to know Singapore is very active to fund projects overseas [middle-east] so long the projects are tied up with a local player over there.

only to very big and already successful companies....lest everyone starts thinking of applying for money to start a new KTV ... tan kuku ok...

[winston]

Not vested. From Kim Eng:-

Hyflux – Company update (James KOH 64321431) Previous day closing price: $2.28
Recommendation: Buy (Maintained)
Target price: $2.63 (Increased from $2.17)

No rights issue and share placements
The recent spate of rights issues and share placement deals has prompted some market talk of Hyflux being the next in line, given the relatively high gearing ratio of the Group. However, in our recent discussion, management has stated categorically that there will be no such development in the near future as they do not see the need for it.

High gearing not an issue
We agree with management that despite a net gearing ratio of 0.8x currently, there is no cause for concern. Even with a $300m Medium Term Note programme in place since June 2008, the Group has only drawn down $23m so far in the previous two months at the bankers’ request. The rates were at 4-5%, which we believe is favourable.

Share price performance of HWT is a positive
The share price of Hyflux Water Trust has risen 47% year-to-date to $0.52 currently. With the implied dividend yield moderating to a more realistic 10.7%, the trust is now in a better position to absorb yield accretive BOT projects from Hyflux. This continues to be important to Hyflux’s capital recycling strategy.

Exit of Istithmar removes overhang
Following the cessation of its Middle East joint venture with its Dubai partner, Istithmar in 2006, the latter has been selling down its 9.7% stake in Hyflux. Management believes Istithmar has exited completely, following some private placement deals recently. We believe this removes a major share price overhang. In its place, Japan Gas Corporation, whom similarly has a presence in Algeria, now owns 2-3% of Hyflux.

Looking forward to FY10, Target price raised to $2.63
We have rolled forward our SOTP valuation to FY10, lifting our target price to $2.63 in the process. Valuation for its international peers such as Veolia has improved substantially since our initiation report in April. Despite its smaller, we continue to believe Hyflux should be traded at a premium with its better growth potential and lower cost base.

[winston]

BUSINESS TIMES - Water treatment company Hyflux limited said on Wednesday it has signed an agreement to build two water desalination plants in Libya, a deal which analysts said could be worth more than S$1 billion ($686.8 million).

[kennynah]

wah so good ah....then the stock price must have moved significantly??? no?

[winston]

Not vested. The newsflow are getting better. From OCBC:-

A bigger victory in MENA
• Signed MOA for two desalination plants in Libya
• Could potentially enlarge EPC orderbook by S$1b and extend earnings visibility to 2013.
• Upgrade to Buy with revised SOTP fair value of S$2.82.

Going bigger and faster in MENA. The MOA is to develop in Libya _-
(1) one 500,000m3/day capacity desalination plant in Tripoli, and
(2) one 400,000m3/day desalination plant in Benghazi.

Compared to Hyflux’s biggest win in Algeria –500,000 m3/day in Magtaa, these potential contracts totaling 900,000 m3/day is almost twice as big in terms of capacity. It is anticipated that Hyflux will undertake the EPC portion while the 49/51JVCOs with its state-owned Libyan
partner would be responsible for O&M throughout the 25 years concession period.

Projects worth S$1.1b potentially. While financial details are still in the works, we estimated these contracts could add S$1b to Hyflux’s EPC orderbook, which is currently about S$700-800m. Assuming financial close for both projects are completed by 2010, projected completion duration of 36 months implies that Hyflux’s earnings visibility will be extended to 2013.

Upgrade to Buy, TP S$2.82. We have raised FY10 forecast marginally in anticipation of minor contribution next year when the contracts are officially awarded. In addition, the expected receipts from these projects have also boosted DCF value of Hyflux’s BOT projects. Consequently, our SOTP fair value was raised to S$2.82, translating to 24x FY09 PE, which is still below historical average PE of 26x.

[kennynah]

too expensive...i cant afford this stock...

[millionairemind]

Hyflux
Buy
Kim Eng | June 26
close $2.25

AGREEMENT to develop two mega desalination plants in Libya: Hyflux has signed a memorandum of agreement (MOA) with the General Desalination Company (GDC) of Libya to jointly invest in and develop two reverse osmosis desalination plants in the Libyan cities of Tripoli and Benghazi. These two plants will have capacities of at least 500,000 cubic metres and 400,000 cubic metres respectively.

EPC contract portion could be $1.2 billion: The structure of these projects is likely to be similar to Hyflux's current Magtaa desalination project in Algeria. This allows Hyflux to undertake the entire EPC portion of the work and part of the O&M work subsequently without an overexposure to equity risk, which is capped at 10 per cent of total projected value. Our preliminary estimates suggest the EPC contracts could be worth a total of $1.2 billion.

Lucky Libya: Libya, which is situated in Northern Africa, has the 2nd highest GDP in Africa, largely due to its 12th largest oil reserves in the world, and has financial reserves of US$59 billion. Hyflux's presence in the country will be preceded by large multinational companies such as Shell and Exxon Mobil. While we recognise there is still an element of political risk, we believe this is mitigated by the structure of the projects.

Silencing the critics: Prior to this, Hyflux has not announced any major contracts for the past 12 months, which we believe has led to sceptism about earnings sustainability for the group. This agreement affirms our investment thesis that with the successful execution of its Algerian projects, Hyflux is becoming a major global player, with many potential opportunities.

Awaiting contract details. Keeping forecasts for now: We expect more details of the contracts to emerge in about three month's time and construction to start in the second half of FY10. These contracts could add earnings visibility till FY14. We are likely to raise our FY11 numbers once contract details are ironed out. In the meantime, we are keeping our target price of $2.63 based on sum-of-the-parts.

[helios]

i was at the singapore water week trade fair on Weds, quiet quiet affair this year ...

& not many people know that Hyflux has Eflux that handles environmental oil recycling ...

[winston]

not many people know that Hyflux has Eflux that handles environmental oil recycling ...

Olivia Lum was talking about this on CNBC a while back. Actually, the entire program, they were talking about Oil Recycling.

I guess, it would be feasible when Oil is expensive or if they can get a huge subsidy from the governments ...