Strong revenue growth in FY12
Hyflux Ltd posted FY12 revenue of S$682.4m, up 42%, and was also some 16% above our forecast, likely aided by higher-than-expected recognition from its TuaSpring Desalination Project (TDP), which is now substantially completed. Reported net profit climbed 15% to S$61.0m, but was around 5% below our estimate, again for the same reason (Asia ex-China projects generally have lower margins). Note that net margin for FY12 came in around 9% versus 12% in FY11. Hyflux has declared a final dividend of S$0.025/share, versus S$0.021 last year; this brings the total dividend for the year to S$0.032, versus S$0.0277 in FY11.
Order book stands at S$2.9b
Going forward, Hyflux is slightly more upbeat about its prospects, citing the still-strong global demand for water infrastructure projects. Management believes that it is well positioned to expand its BOT and EPC portfolio while growing that of its O&M further. Recall that it had recently signed the water purchase agreement (WPA) to deliver desalinated water to the Dahej Special Economic Zone in Gujarat, India. Management expects the WPA to have positive material financial impact if the financial close is concluded by end FY13. It adds that TDP is scheduled to start operating in 2H13 for a period of 25 years; it is also in the process of securing non-recourse project financing for it. Currently, its order book stands at
S$2.9b (as of end- 2012), and management believes that growth in the O&M portion will provide a steady and recurring revenue stream; it further expects the O&M revenue to capture the full impact of its current portfolio by FY16.
Maintain HOLD
For now, we will maintain our HOLD rating and S$1.44 fair value on the stock; but we do see room for re-rating should it win another substantial contract.
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