Hyflux

Hyflux: HSBC believes that driven by upfront investments and losses / write-downs in its Chinese businesses, Hyflux incurred cumulative operating cash flow losses of $820m over 2010 – 1Q14, which explains why the water company raised $530m in 1H14 ($296m perpetual securities + $63m sales of associates stakes + $170m sale and lease back of corporate HQ). Meanwhile, business at Hyflux’s more profitable EPC (engineering, procurement and construction) segment has been slow, while its O&M (operations & maintenance) segment has poor profitability. Going forward, Hyflux has no large EPC contract except for the India Dahej project yet to start construction in 2H (if on plan), and prospects of new contract wins are dim. HSBC believes the homegrown company may continue to struggle; reiterates Underweight, cuts TP to $0.99 (from $1.10).