Hyflux

Hyflux: swung into an unexpected 4Q13 net loss of $7m (FY12 net profit: $21.3m), below consensus expectation of $12m net profit. Revenue slumped 54% y/y to $85.1m, due to depletion of the group’s EPC order book following the completion of the Tuaspring desalination plant in Sep ’13. For FY13, revenue fell 18% to $535.8m, and net profit sagged 28% to $44m, as higher depreciation, other expenses and finance costs outweighed a reduction in raw materials and staff costs. Going forward, mgt aims to achieve financial closure for its Dahejspring project in India in 1H14. Hence, group profitability could remain low in 1H14 before the start of EPC work on the plant. While mgt noted a growing pipeline of projects worth ~US$8b available for tender in its key markets in MENA, India and S’pore, these projects are likely to be awarded in mid-’14 at the earliest, which means an order driven recovery could take time. As at end Dec ’13, Hyflux’s net borrowings doubled to $1.0b and net gearing expanded to 1.15x, from 0.56x a year ago, mainly to fund its water projects. The group declared a final dividend of 1.6¢, bringing full year payout to 2.3¢ (FY12: 3.2¢), implying a mere 1.9% yield. Without earnings visibility, Hyflux’s valuations remain unattractive at 2.1x P/B and a whopping 51.2x P/E. Latest broker ratings: Credit Suisse maintains Neutral with lower TP of $1.20 (from $1.30), as the next few qtrs. are likely to present significant order book uncertainty.