Singapore “Flyer” of the Week: Hyflux

singapore flyer

Hyflux (SGX: 600) gained 3.5% this week to close at $1.195. This makes it our Singapore “Flyer” of the Week.

Hyflux is a fully-integrated water solutions company with operations worldwide. It built the world’s largest seawater reverse osmosis desalination plant in Algeria in 2008 and the largest membrane-based seawater desalination facility in Singapore in 2013.

On 25 June 2014, the firm announced that it has signed a memorandum of understanding with Mexico’s leading infrastructure bank, Banco Interacciones, to “jointly carry out exploration, structuring, pursuit and/ or installation of water and other projects and developments in Mexico”.

The following day, Hyflux then agreed to a sale-and lease-back deal with Ascendas Real Estate Investment Trust (SGX: A17U). Under the deal’s terms, Hyflux would sell its property, Hyflux Innovation Centre, for S$170 million to Ascendas REIT and lease-back said property for a period of 15 years.

The rationale for the move is to free up capital for Hyflux to acquire new technology; to make investments in research and development; to expand and automate its membrane manufacturing operations in Tuas Hub with the aim of upping productivity; and lastly, to finance its infrastructure project tenders.

Olivia Lum, the Executive Chairman and Chief Executive Officer of Hyflux, said, “The sale and lease-back transaction is part of our capital recycling strategy to enhance the efficiency of our balance sheet and to redeploy capital for strategic investments. Hyflux Innovation Centre will continue to be the nerve centre of our global operations and we intend to remain at Hyflux Innovation Centre for the long-term.”

The water solutions outfit is trading at 49 times its historical earnings now.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.