OCBC cuts target on Hyflux to $2.26; keeps buy

Stock Name: Hyflux
Company Name: HYFLUX LTD

Research House: OCBC

Price Call: BUY

Target Price: 2.26

OCBC Investment Research has lowered its target price on Singapore water treatment firm Hyflux (HYFL.SI) to $2.26 from $2.41 but maintained its buy rating.

Hyflux reported a 47% year-on-year fall in second quarter net profit to $14.5 million, hurt by lower contributions from the Middle East and North Africa market with the near completion of some of its projects there.

Higher financing, depreciation and amortisation costs also weighed on the company’s results.

OCBC said it had cut its revenue and earnings estimates by 8% and 15%, respectively, for Hyflux’s 2011 fiscal year to reflect the company’s muted first half performance and the expected delay at a desalination project.

Hyflux announced on July 28 that a fire broke out at its warehouse at its Magtaa seawater desalination plant in Western Algeria.

However, OCBC said it remains positive on the waste water sector and it believes that Hyflux offers the best proxy to it. Hyflux’s order book now stands at $2.1 billion and it intends to focus on China and Singapore going forward.

At 1:03 P.M., Hyflux shares were down 3.9% at $1.875. The stock has fallen about 19% since the start of the year.