Hyflux

Hyflux: 2Q13 results broadly in line with consensus; Earnings were flat at 1% y/y of $17.5m while revenue stumbled 24.6% to $183.6m largely due to fewer expansion projects from China as a result of the weak macro environment. Despite lower revenue, gross margin improved to 42% from 33% in 2Q12 due to a 35% decline in raw materials used and lower subcontractors' cost. Construction of the Tuaspring Desalination Plant is on track, with the official opening scheduled in September 2013. However, the on-site 411MW CCGT power plant is still pending connection to the national grid, with management noting that it is still working closely with the authorities on the issue. Despite the overall economic uncertainty, management expects tendering activity to pick up in 2H13, with Hyflux in the process of preparing several bids as it repositions itself for opportunities in growth markets. Hyflux’s order book at $2.7b, comprising $792m in EPC projects and $1,939m in O&M contracts. An interim dividend of 0.7¢ declared. CS maintain NEUTRAL with TP of $1.50.