Hyflux Ltd posted an uninspiring 3Q14 showing, with revenue down 46% YoY to S$101.0m, reflecting the timing of project commencements so far; gross profit also slipped 48% to S$60.2m. As a result, reported net profit fell 55% to S$11.3m, which also included a tax credit of S$5.2m. Still, we did see some sequential improvement, as we estimate that core earnings came in around S$6.6m, versus a net loss of S$23.1m in 2Q14.

YTD, revenue fell 40% to S$270.0m, meeting 63% of our full-year forecast, while reported net profit jumped 117% to S$110.6m, estimated core loss came in around S$20.8m, or about 39% of our FY14 forecast. But the company warned that the last quarter is likely to be slow, given the mixed global economic outlook.

While the group continues to actively pursue municipal and industrial projects in select markets in MENA, Asia and Latin America, we note that Hyflux has not announced any new contracts this year. In fact, management does not expect to achieve financial close for the Dahej project before year end.

We will be speaking with management to get more clarity shortly; but we are likely to keep our SELL rating and DCF-based S$0.75 fair value intact.

Source: OCBC Research - 6 Nov 2014