The Straits Times / The Business Times News on Hyflux

Hyflux shares slump as third-quarter profit falls 86%

WATER treatment firm Hyflux yesterday reported that third-quarter net gain slid 86 per cent to $1.9 million, sending its share price into a tailspin. The counter dropped 7.3 per cent or 20 cents to close at $2.54 after news of the weak results alarmed investors.

Hyflux blamed the slide on lower sales in Singapore and higher staff costs, which grew 23 per cent to $5.6 million, as it expanded into new markets and the oil recycling business.

Another factor was the elimination of engineering, procurement and construction (EPC) revenue from projects of Hyflux's unit SinoSpring Utility since July.

This was the result of Hyflux raising its stake in SinoSpring to 80 per cent from 50 per cent, by way of a US$25 million (S$39 million) equity injection.

Hyflux previously billed SinoSpring for water projects and recognised it as revenue, but is unable to do so after it became an 80 per cent Hyflux subsidiary.

For the three months to Sept 30, revenue declined 42 per cent to $29.4 million.

'We decided to increase our equity stake in SinoSpring, notwithstanding the short-term impact this move will have on Hyflux's financial reporting numbers,' said Hyflux group chief executive and president Olivia Lum yesterday.

The group said SinoSpring has 13 projects in China worth $400 million, which will generate 25 to 30 years of recurring annual revenue of about $160 million when fully operational.

For the first nine months of this year, China accounted for 71 per cent of total revenue, compared with 42 per cent last year, with industrial sales growing 99 per cent to $66.9 million or 67 per cent of group revenue.

As at Sept 30, the group's order book stood at $454 million, up 198 per cent, compared with the figure three months earlier.

Earnings per share for the third quarter were 0.36 cent, down from 2.67 cents previously, while net asset value per share stood at 40.8 cents as at Sept 30, up from 36.8 cents as at Dec 31 last year.

UOB Kay Hian Research maintained its 'sell' recommendation yesterday, with a target price of $1.60.