Hyflux

Hyflux: Hyflux has set up an investment holding company with China-based Tuspark Technology, backed by Tsinghua University. Hyflux will eventually divest 5 of its wholly-owned China water plants to the holding company for CNY890m. These plants have a total capacity of 265k tonnes/day. This results in a one-off divestment gain of S$42m and net-cash inflow of S$146m in FY15.

Currently, Hyflux owns 29 water-treatment plants with total capacity of 1.3m tonnes/day. Excluding the above 5, the remaining 24 are owned under Galaxy NewSpring. This is its 50:50 JV with Japan’s Mitsui Group. MayBank KE believes Hyflux will work towards divesting its remaining 24 plants in the future.

Factoring in divestment gains, FY15 net profit improves from a loss of S$11m to a profit of S$16m. MayBank KE reiterates its HOLD rating with TP: $0.96 given still-limited visibility in its core markets. This is 10% discount to its closest peer, United Envirotech (BUY, TP: $1.93). In this sector, the house prefers China Everbright Water (BUY, TP:$1.17), followed by SIIC (BUY, $0.26), then UENV.