Hyflux’s tech expertise could solve global water shortage in the long run

For now, the company’s position is not that impressive.

Hyflux is up for a challenge as its expertise in membrane-based desalination technology could help solve the global water shortage problem.

OSK-DMG, however, says that the company’s medium-term earnings weakness could weigh on stock sentiment. Intense competition for EPC projects could crimp margins, reducing Hyflux’s margin for error.

OSK-DMG says that the company could have USD8b worth of projects that could be up for grabs in the next 12 months. Hyflux also has potential for further assetrecycling, with its SGD1b portfolio of plants and concessions. Any large-scale asset recycling should be positive for its share price.

Upside risks include a strong order comeback in the Middle East and Africa. Downside risks include failure to clinch key projects such as the Changi NEWater plant and bigger-than-expected margin declines due to price wars, in which case, large contract wins may not sustain its re-rating.