Maybank Kim Eng 2015-08-11: Hyflux - 2Q15 Results boosted by one-off items. Maintain HOLD.

HYFLUX LTD 600.SI

Results boosted by one-off items

Results below expectations due to low construction work.
Expect better 2H15 with new project contribution from Oman and Saudi Arabia.
Big contract wins needed to stimulate share price. Maintain HOLD with lower TP of SGD0.90.

Hyflux’s 2Q15 results were below our expectations.
Reported revenue increased by 18% YoY to SGD94.8m and reported bottom line decreased by 58% YoY to SGD26.0m.
But numbers were distorted by one-off items. 2Q15 revenue included a one-off gain of SGD42.5m from the divestment of China water assets while 2Q14 other income included a divestment gain of SGD83.5m from the sale of Hyflux Innovation Centre.

Without those, core revenue would be reduced by 35% YoY and bottom line would be a loss of SGD16.5m compared with a loss of SGD22.1m last year.
Weak performance this quarter was mainly due to lower construction work after Tuaspring plant was substantially completed.

Tuaspring power plant (411 MW capacity) has been connected to the power grid and testing and commissioning is in progress. It is expected to be operational in early 2016.
Higher contributions from Mideast will kick in with development of new projects in Oman and Saudi Arabia. Thus we expect 2H15 should be better compared with 1H15.
Hyflux will continue to explore potential asset divestment opportunities.
As 1H results came below our estimation and the project in India is being delayed, we lower our EPS forecasts by 5% for the next three years.
Current price is not cheap at 22x FY16E PE.
With current order book of SGD2.9b, we believe big contract wins are needed to stimulate the share price.
Maintain HOLD with TP SGD0.90 (from SGD0.96 previously), still pegged to 25x FY16E PE.

Wei Bin | http://www.maybank-ke.com.sg/ Maybank KE 2015-08-11

HOLD Maintain HOLD 0.90 Down 0.96