Hyflux

Hyflux: 3Q13 net profit surged 74% y/y (43% q/q) to $25.3m, as revenue leaped 26% y/y (36% q/q) to $187.7m. This was due to the completion of its Tuaspring plant, which also led to a surge in gross margin to 62% in 3Q13 from 42% in 2Q13. The decline in raw materials and consumables used and subcontractors’ costs reflected cost management for the project. This resulted in 9M13 net profit of $51m, 98% of consensus FY13 forecast. Hyflux is tendering for various large projects, up to $2b in value, in the Middle East and Africa regions, including Saudi Arabia, Kuwait, Oman, Nigeria and Qatar, CS expect these projects to be awarded in mid- 2014 at the earliest as time is required to evaluate proposals. CS lower its 2014 net profit (before preference shares) from $63m to $45m due to orderbook uncertainty following the completion of the Tuaspring plant. While the stock is trading close to its trough P/B valuation, house would await greater earnings visibility before turning positive. Latest broker ratings as follows: OCBC maintains Hold with $1.23 TP (from $1.215) CS maintains Neutral with $1.30 TP (from $1.50) CIMB maintains Neutral with $1.18 TP (from $1.35)