Hyflux

[helios]

Olivia Lum was talking about this on CNBC a while back.

Yes, Sir Winston!

Check out TheEdge magazine this week, page 14.

She's on the cover & certainly in the limelight ...

[helios]

the news quoted that:

1. libya (hyflux's 2 deals) was out of 10 potential deals;
2. funding issue (MENA region was backed by bankers) - Q: why not China projects?;
3. analysts target prices are very high > $2.5 - 2.8 ... - Q: any further upside when the news were already announced?
4. 20X forecast EPS

wait for correction lar (@ 1.8?) ...

[winston]

Not vested. From DBS:-

Hyflux: Resurgent 2Q09 results

Resurgent 2Q09 results. Hyflux Ltd posted its 2Q09 results last night, where revenue jumped 24.4% YoY to S$134.5m, while net profit climbed 14.7% to S$25.9m. The better performance was due to the progressive completion of higher-valued projects, especially from the MENA region, with continued active project execution driving improved gross profit margins.

More importantly on a sequential basis, revenue shot up 52.4%, while earnings surged >400%, but this comes as no surprise as we had already noted the seasonality factor in our 1Q09 report (also see Exhibit 1). And for 1H09, revenue climbed 12.7% to S$222.7m, meeting 36.4% of our FY09 forecast, while net profit rose 9.6% to S$31.0m, or 50.4% of full-year estimate.

Municipal business continues to drive growth. On a segmental basis, we note that growth continues to be driven by its municipal business, which jumped 34.5% YoY and 54.6% QoQ to S$116.6m in 2Q09, aided by progressive EPC recognition of the Tlemcen and Magtaa projects in Algeria.

While industrial business fell 17.4% YoY to S$17.6m, it was up 41.9% QoQ, where there have been signs of a business recovery in China. Going forward, management notes that municipal sector's fundamentals remained strong and expects the MENA and China markets to remain key contributors to its revenue.

Key MENA and China markets. Its current order book stands at S$1646m as at end-Jun, up further from the S$1480m at end-Dec (see Exhibit 2); more importantly, Hyflux pointed out the increase came mainly from its Operations & Maintenance segment, which surged 1.1% to S$694m following the completion of several China plants - this would translate into stable income over the next 20-25 years.

While its S$952m EPC orders will progressively be recognized over the next two years, we expect this "shortfall" will be replenished by its two potential contracts in Libya - we had earlier estimated that the project value of the two projects should easily exceed S$1b (to as much as S$1.5b) but the actual deals may take up to 1.5 years to conclude. Hyflux is also looking at new markets like India but for the moment, it prefers to remain more of a technology provider.

Raising fair value to S$2.96. Due to the better-than-expected recovery in gross margins, we have bumped up our FY09 net profit estimates by 17.9% (FY10 by 17.5%), while keeping our revenue estimates unchanged. This in turn raises our fair value from S$2.52 to S$2.96, still based on 20x blended FY09/FY10 EPS. Maintain BUY. (Carey Wong)

[winston]

Not vested. From OCBC:-

Hyflux: Timely JBIC MOU; maintain BUY

Signs MOU with JBIC. Hyflux Ltd recently signed a MOU (Memorandum of Understanding) with JBIC (Japan Bank for International Cooperation). According to Hyflux, the global collaboration will see JBIC examining the possibility of providing financing to projects that Hyflux has identified - some of the financial instruments used could include debt finance, guarantees and equity investment (including equity investment in fund). More importantly, the collaboration will also allow for the participation of Japanese equipment suppliers or investors in the global water projects developed by Hyflux (Exhibit 1).

MOU is timely as credit markets are still thawing. We think that the MOU is timely as access to credit (for many companies) continues to be quite restrictive as the credit markets are still thawing and have not completely unfrozen. With the MOU, we believe that Hyflux will gain a significant amount of confidence and flexibility in bidding for mega projects

- it is not far fetched to say that financing capability underpins these water projects. It should also narrow that gap between Hyflux and its more established global competitors like Veolia and GE Water. According to a recent desalination market forecast by GWI, Hyflux is already ranked 7th among the top 20 plant suppliers in 2005-2008; with the completion of its MENA and China plants, Hyflux is expected to rise to 2nd place (Exhibit 2 2).

Libya deal talks ongoing. Meanwhile, we understand that Hyflux is still in negotiation to build and operate two mega desalination projects in Libya. It has been just three months since the signing of the MOU and such deals typically take around 1-1.5 years to conclude; while Hyflux may still need time to understand the culture and climate in Libya, it is confident that it should be able to utilize its experience in Algeria to good effect in Libya.
Separately, JBIC has not ruled out an equity stake in the Libya projects - this would depend on the participation of Japanese companies.

Raising fair value to S$3.30. In line with the recovery in the global economy as well as business activities in China, we are bumping up our FY10 revenue and earnings estimates by 2.0% and 2.4%, respectively. We have also
upgraded our valuations from 20x blended FY09/FY10 to 22x (which is still fairly undemanding compared to its historical average of 40x), thus raising our fair value from S$2.96 to S$3.30. Maintain BUY. (Carey Wong)

[millionairemind]

November 4, 2009, 5.32 pm (Singapore time)

Hyflux sees 5% rise in Q3 profit even as revenue falls
By UMA SHANKARI

Hyflux Ltd on Wednesday reported a 5 per cent rise in Q3 net profit to S$18.1 million from S$17.3 million a year ago.

The increase came as revenue fell 29 per cent to S$126.5 million, from S$177.4 million in Q3 2008. The decrease came as the company was hit by a slow down in the China market.

China accounted for 24 per cent of total revenue, while the middle east and north Africa region contributed about 72 per cent of total revenue for the third quarter ended Sep 30, 2009.

Looking ahead, Hyflux said that despite the uneven recovery on the global economic front, the outlook for the environment and water industry remains positive.

The municipal sector will continue to be the key contributor to the group's revenue, particularly in the middle east and north Africa region where the group's desalination projects are progressing well.

[winston]

Not vested. From DBS:-

Hyflux 3Q earnings of S$18mil outperformed our expectations slightly. Margins are holding up on cost containment and project execution. Growth momentum is supported by on
schedule execution of existing projects. Our analyst maintains buy with TP unchanged at $3.50.

From a trading perspective, the stock has moved up from $2.90 in the past 1-week, likely in anticipation of results. Thus, the trading action today should be muted.

[winston]

Not vested. From CIMB:-

Hyflux Ltd (S$3.12) - 3Q09 results - On track for a record year

Maintain Outperform; 3Q09 results within expectation. 3Q09 PATMI of S$18.1m (+5% yoy) met consensus estimate and our expectations. 3Q09 and 9M09 net profits make up 27% and 74% of our FY09 forecasts respectively.

We are keeping our estimates unchanged. Nevertheless, our target price has been raised from S$3.18 to S$4.02 as we roll over to end-CY10, still based on sum-of-the-parts valuation. A key milestone to look out for is progress in its Libyan projects, expected to reach financial close in 1H10.

In our opinion, Hyflux is a prime candidate to benefit from government infrastructure spending around the world. Catalysts for the stock could include fresh order wins, particularly those in collaboration with Japan Bank for International Cooperation.

Recognition of MENA municipal projects alone accounted for 71% of total revenue.
3Q09 revenue of S$126.5m, down 28.7% yoy, should not be alarming. Lower revenue from China was to blame. Revenue from the municipal sector slipped to S$113.3m (-27% yoy) in the absence of contributions from the Tianjin Dagang desalination plant, which has been completed. Industrial-sector revenue fell 43% yoy to S$12.7m on the back of a general slowdown in China’s industrial sector and the timing of order deliveries. All this had been taken into account in our forecasts.

Cost containment in play. Raw material costs fell to S$81.7m (-37% yoy), while staff costs declined 13% yoy on a lower volume of contract work in China. Gross margins were up in 3Q09 to 35.8% (27.4% in 3Q08). Project expense overruns from the last set of results did not occur this time. However, other opex did increase, as a result of higher project development costs and forex differences. The balance sheet remained in good shape with a cash position of S$129.5m and net gearing of 0.7x.

MENA projects on track. Hyflux’s operations & maintenance order book was flat (S$694m at end-1H09) despite the completion of several plants in China, while its EPC order book stayed healthy at around S$900m. Management revealed that the Tlemcen desalination plant (90% completed) will continue to contribute in the next two quarters, coupled with the recognition of the Mactaa project, which is on schedule.

[winston]

Not vested. From Kim Eng:-

Hyflux – 3QFY09 Results (James KOH 64321431)
Previous day closing price: $3.12
Recommendation: BUY (maintained)
Target price: $3.52 (maintained)

Still on track to beat last year’s record profits
3Q09 net profit increased 5% yoy, even as revenue declined 29% during the same period. We are unconcerned about short-term revenue fluctuations due to the lumpy nature of project recognition. With 9M09 net profit up 8% yoy, the Group is on track to beat FY08’s record success while concurrently building up its business into a position of strength.

Project cost management has been a pleasant surprise so far
While we earlier had margin concerns for the Algerian projects due to Hyflux’s aggressive bids as well as its inexperience in that arena, project execution has been smooth so far. Net margin has improved from 13% to 14% for 9M09, helped by tax incentives from EDB, lower commodity prices and lower cost procurements of raw materials.

Middle-East North Africa (MENA) the new land of opportunities
Management updated that it is wrapping up its first mega-desalination project in MENA, the $300m Tlemcen, Algeria project, and also stepped up work on the Magtaa project. With a strong presence in Algeria, which has one of the most extensive water programmes in the world, we expect Hyflux to be amongst the front-runners for further projects.

Unconcerned by changing orderbook profile
The announcement of new China water projects by other SGX-peers stands at a contrast to Hyflux’s lack of new contracts since April 08. However we reckon this is management’s conscious strategy to steer towards larger-scale desalination projects which plays to its competitive advantage. This means a changing orderbook profile, where orderbook will decline periodically, until the next big contract gets locked in.

Maintain target price of $3.52
With 9M09 making up about 72% of our full year estimates, we keep our profit forecasts largely intact, with higher margins making up for the lower revenue recognition. We estimate net EPC orderbook to be about $600m as of 3Q09. We maintain our target price of $3.52 as we await more details on the Libyan projects during FY09 results announcement.

[kennynah]

and the price stays stagnant....forever.....

[helios]

Was chatting about this over pizza & lunch with my consultant - yesterday.

Could anyone believe this is a potential $10 value stock??