Brokers' Take

Hyflux, July 1 closing : $1.51

02 July 2004
The Business Times

GK Goh Research

THE water treatment specialist has a $24 million contract in China – its second-largest industrial contract to date - to build a membrane filtration system for the manufacturing facility of Shanxi Heyi Fine Chemical Industry.

Completion of the project is expected by 2005, with 65 per cent of the contract value ($15.6 million) to be recognised in FY04 and the balance next year.

Hyflux is delivering on its promise to garner more industrial contracts in China from the high-margin pharmaceutical and petrochemical sectors.

It hasn't provided an update on its outstanding order book after the release of its 1Q04 results.
But we estimate that this $24 million contract will boost its order book by about 50 per cent to more than $75 million for the nine months to Dec 31, 2004.

This means that 75 per cent of our FY04 revenue forecast is backed by secured contracts, up from 60 per cent previously.

We aren't changing our forecast yet, but there is potential earnings upside if Hyflux continues to grow its order book with such contracts. Maintain $1.78 (21x FY04) price target.

Compiled by VEN SREENIVASAN