Hyflux

Hyflux: Annouced1Q13 results which was in-line with expectations, with 1Q traditionally being the weakest quarter. 1Q13 revenue at $125m (-8% y/y, -37% q/q) and net profit of $8m, (+5% y/y, -63% q/q). The Group’s municipal projects in Asia, ex-China were major contributors to revenue, contributing 87% to first quarter revenue, while the group’s operations in China provided 8%, while Middle East and North Africa contributed 5% to total revenue. Bottom-line was weighed slightly by associates and JVs, which made a loss of $3m in 1Q13, which we note could likely be due to weak performances from the group’s associates in China. Going forward, market watchers expect increased contributions from the group’s project pipeline over the next few quarters, while management note of an improvement in the global water industry as governments are investing in large-scale water projects due to pent-up demand. Group will actively pursue opportunities in Asia, the Middle East and in selective markets in Africa. At the current market price of $1.44, valuations appears steep, with Hyflux trading at 24.7x Forward P/E versus peers Sound Global at 8.1x and United Envirotech at 20.4x. Latest Broker Ratings as follows: CIMB maintains Neutral with $1.42 TP CS lower TP to $1.50 (from $1.60), and downgrade to NEUTRAL OCBC maintains Hold with $1.44 TP