Hyflux
Feb 19 close: $1.77
CIMB-GK, Feb 19

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CORE profit above expectation: FY08 core net profit of $59.8 million came in within consensus estimate but was 16 per cent above our forecast, on better-than-expected progress in China and the Mena (Middle East and North Africa) region. The Mena region, which accounted for 40 per cent of revenue, was driven by progressive EPC (engineering, procurement and construction) recognition of Tlemcen and the award of the Magtaa project.

Record revenue of $554.2 million (+226 per cent y-o-y), anchored by municipal segment: Though no figures were given, we estimate that the topline included $10 million from three water treatment plants divested to Hyflux Water Trust (HWT) in Q4 2008.

Revenue from the municipal sector continued to shine, leaping more than five times to $476.8 million (86 per cent of total), attributable to good progress made in China and Algeria.

However, this was offset by the industrial sector, which disappointed with turnover of only $76.4 million (-25 per cent y-o-y), due to the economic slowdown in China.

EPS forecasts adjusted; TP reduced from $3.38 to $2.66, still based on sum-of-the-parts valuation: Our FY09 forecast has been reduced by 3.8 per cent on lower margin assumptions, but FY10 estimate has been lifted by 7.5 per cent on higher revenue recognition.

We also introduce FY11 estimates. Hyflux is well positioned to weather the economic turmoil largely due to the nature of its municipal business, which is expected to benefit from governments' pump-priming to revive economic growth through infrastructure projects. Maintain 'outperform'.

OUTPERFORM

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