Stock Name: Hyflux
Company Name: HYFLUX LTD
Research House: DBS Vickers
Company Name: HYFLUX LTD
Research House: DBS Vickers
DBS Vickers upgrades Hyflux (600.SG) to Buy from Hold following the company’s Tuas desalination plant project win. It raises its target to $2.47 from $2.01.
“Hyflux has secured $982 million worth of contracts (year to date) vs our conservative assumption of $250 million. We have therefore raised FY11/FY12 (earnings estimates) by 35% and 168%.”
“Hyflux has secured $982 million worth of contracts (year to date) vs our conservative assumption of $250 million. We have therefore raised FY11/FY12 (earnings estimates) by 35% and 168%.”
It notes the $890 million project cost is much higher than market expectation of $400 million-$500 million, largely because of the power plant.
It adds, with a first year tariff of $0.45/cubic metre, Hyflux is the lowest among nine bidders: “contrary to concerns over the contract’s profitability, management guided margins for this project is comparable to the company’s current average. We find the project’s equity IRR in the low teens to be attractive, compared to 8%-10% for some China projects. More importantly, this contract is a key growth driver for Hyflux since its expansion in the Middle East is delayed by the region’s turmoil.”
Shares are +12.0% at $2.05.
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