Despite the tough economic conditions, Hyflux is continuing to increase its staff headcount as well as beefing up its management team. Key hires recently include Ms Winnifred Heap (Formerly JP Morgan Head of Research) as Group Executive Vice President, Capital Markets and Mr Lee Soon Eng (Formerly Executive Vice-President Sembcorp Industries) as Senior Managing Director, Global Operations.
Hyflux announced that it has achieved financial close for its 500,000m3/day desalination plant in Algeria in March 09. With this green light to start work, we expect management to shed some light on its progress. This is also in line with our estimated revenue recognition pattern for this project, which we believe will form around 20% and 39% of total revenue in FY09 and FY10 respectively .
In our recent discussions with the Trust’s management, they reiterated their confidence that they will be able to meet their forecasted DPU of 5.26 SG cents and could potentially gain from higher water tariffs in China. Strong performances by HWT would vindicate Hyflux’s capital recycling strategy.
We maintain our BUY call on Hyflux with a SOTP target price of $2.13. With funding for its major projects secured, we believe there could be new contract flows in the near future to replace existing projects in China. We also expect increased market confidence as Hyflux continues to execute its prominent desalination projects.
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