Hyflux

Hyflux: Announced 1Q12 results which were at the lower end of estimates.. Rev at $138.9m, +60% yoy and net profit at $7.7m, +4% yoy. Gross margins narrowed to 38% in the latest qtr, lower than the 51% yoy. Rev was boosted by contributions from grp’s Asian operations which boosted rev during the qtr, but higher operating costs of raw materials and consumables, which registered a 96% increase, as grp Group geared up for the construction of its SG desalination plant, which weighed down on grp’s net profit. Grp cited the geographical shift in the order book profile from MENA to Asia, and in 1Q12, China contributed 26% or $36.3m of rev while MENA account for 9$ or $12m. SG and the other smaller countries contributed S$90m or 65% of grp’s rev. Going forward, grp cited good inroads in India with its first large-scale desalination project at Dahej, while noting that good progess has also been achieved for its Tuaspring Desalination plant in SG. Add that Global contracted desalination capacity is expected to experience some recovery although market conditions continue to be weak. Ratings as follow: Citi maintains Buy with $1.86 TP Kim Eng maintains Sell with $1.15 TP