Hyflux

Hyflux: Could see positive interests, after annouced that it was named the ‘Preferred bidder’ by SG’s PUB to undertake the project for the country’s 2nd and largest seawater desalination plant. The total project value is $890m, which will see orderbook visibility over the next 2-3 yrs….

Plant will have a capacity of 318,5000 cubic metres (70m gallons) / day, which is equivalent to about 20% of Singapore’s current water demand. This is the world’s 2nd largest reverse osmosis desalination plant, after the 500,000 cu/ day plant in Magtaa, Algeria which is also being developed by Hyflux currently…..

Project will be on a DBOO (design, build, own and operate) basis, with PUB granting a concession period of 25yrs. Hyflux will fund the project through a combination of equity and project financing, which should not be difficult, given the offtake agreement of $0.045/cu with PUB. In this model, the Group will undertake the EPC ($750m) and operations & maintenance work…..

Project is expected to achieve financial close by Aug2011 and completion by 2013, with rev contribution mostly in 2012/ 2013. Kim Eng upgrades Counter to a Straight Buy from Sell, with a $2.10 TP based on SOTP, while UBS upgrades to Buy from Neutral with $2.40 TP. CS maintains OutPerform rating with $2.80 TP, while JP Morgan maintains Neutral Call with $1.90 TP.