Hyflux

Hyflux: Lost bid for PUB’s Changi NEWater BOT project to 80:20 consortium formed by Beijing Enterprise Water (371 HK) and United Engineers (UE). The project will have daily treatment capacity of 228,000 tonnes under concession of 25 years. While the contract value was not announced, Maybank-KE estimates it to be ~$180m. This is a piece of negative news as Changi NEWater was one of the key projects eyed by Hyflux this year. However, this does not come as a complete shock to Maybank-KE as the competition for new projects has been fierce, given a dearth of large contracts globally in the recent two years. Hyflux had been making core net losses over the past two quarters. The nearest catalyst for the stock maybe the financial close of its Dahej Spring project in India, but in the short term, expect Hyflux’s stock price to be dogged by a low orderbook and weak earnings visibility. As the project was not accounted for in forecasts, Maybank-KE maintains Hold with the same TP at $1.07 for Hyflux. This implies a 25x FY16E P/E. Meanwhile, the house prefers HanKore and SIIC for water-sector exposure.