Hyflux

Hyflux: Consortium comprising Hyflux Hitachi, Itochu group wins US$600m desalination project in India to develop a seawater desalination plant in Gujarat, India.
The consortium will develop the project on a 'Design, Build, Own and Operate' (DBOO) basis and to supply the desalinated water to DSL. The shareholding structure will be finalized at a later stage. DahejSpring will be allotted land by DSL in the Dahej SEZ to develop and operate the project for 30 yrs.

Hitachi will be the lead EPC Contractor and will collaborate with Hyflux on the EPC works and the O&M works. It will be Asia's largest seawater reverse osmosis desalination plant to date. The Project is not expected to have a material impact on Hyflux’s financials for FY12.

For comparison purposes, the capacity of the latest project in India, would have an operating capacity of 75mGD (Gallons per day) vs Hyflux Tuas’s plant of 70mGD and Sembcorp Industries Fujairah plant of 100mGD. Note however that latest project by Hyflux in India is a consortium, and Hitachi is the lead contractor.

Ratings as follow:
Citi maintains Buy, TP $1.86 from $2.15, house continue to like the long-term and attractive nature of Hyflux’s environmental-linked business, and this win in India will likely cause investors to relook at Hyflux. Its low net gearing level at 0.2x (0.8x in 2010), with cash on hand now S$662m, can help it with Chinese project wins where local competition likely is especially credit-constrained.

Nomura Reduce, TP $1.00, believe the additional project is a positive development for Hyflux.
However, still prefer Beijing Enterprises Water and China Everbright in the water space. Hyflux trades at 15x 2012F P/E vs. BEW’s 14x and CEI’s 14x.