Would Warren Buffett Buy Hyflux Ltd?

Warren Buffett is quite clear in is investing strategy. He looks for assets that can deliver him a respectable return over the lifetime of the asset.

So what would he make of Hyflux Limited (SGX: 600)?

Hyflux is a water-treatment company. It takes dirty water and cleans it up to produce clean water. It’s a simple business, which is likely to appeal to Buffett.

Over the last decade, Hyflux has delivered a relatively steady stream of profit to shareholders. The median net income since 2004 was S$55 million. Last year the bottom-line profit came in at S$41 million.

The company’s Net Income Margin has been quite steady too. On average, Hyflux makes around $13 on every $100 of sales.

However, Hyflux is slightly below average in its use of assets. The Asset Turnover is 0.35. In the main, Singapore companies generate around $40 of sales from every $100 of assets at their disposal.

Revenues at Hyflux appear to be lumpy. The average turnover for the company is S$466 million. But over the last decade, sales have been as high as S$659 million and as low as S$132 million.

In the last dozen years, Hyflux has been free cash flow positive in just three of them. Curiously though, the dividends have risen over this time.

Hyflux has some attributes that Warren Buffett could find attractive. But there are some features of the company that the Sage of Omaha could find unappealing. On balance, he might give this one a miss.

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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 Director David Kuo doesn’t own shares in any companies mentioned.