Hyflux

Hyflux: Maybank-KE initiates with Hold with TP of $1.07. Although Maybank-KE thinks that Hyflux’s expertise in membrane-based desalination technology is a long term solution to global water shortage, its medium-term earnings weakness could weigh on stock sentiment. Aside, intense competition for EPC projects could crimp margins, reducing Hyflux’s margin for error. Catalysts for the stock include big order wins (US$8b worth of projects for grabs over next 12 months), and asset recycling ($1b portfolio of plants and concessions) Nevertheless, investors should note price wars could cause a higher than expected margin decline, negatively impacting its re-rating. At 1.7x FY16e P/B and 26.7x FYe P/E, vs sector average of 1.6x FY16e P/B and 20.7x FY16e P/E, Maybank-KE thinks it’s too early to enter