it’s so clear - hyfluxinvestors.hyflux.com/pdf/fy2005_full_year_presentation_slides.pdf · palm...
TRANSCRIPT
1
It’s So Clear
Full Year 2005 Results Review
16 Feb 2006
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AgendaAgendaAgendaAgenda
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2
Financial Review
Corporate Updates
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4
Growth Strategies
Business Outlook
2
Financial Review
4
Financial HighlightsFinancial HighlightsFinancial HighlightsFinancial Highlights
0.710.05
Net Debt-to-Equity
Ratio (including PF loan)
1 pt23%24%ROE
66%5.55cents9.21centsEPS
77%S$26.1mS$46.3mPATMI
76%S$27.9mS$49.2mPAT
48%S$88.7mS$131.5mSales
+ / (-) %2004 2005
Source: Hyflux
3
5
Strong Revenue Growth Strong Revenue Growth Strong Revenue Growth Strong Revenue Growth
000020202020404040406060606080808080100100100100120120120120140140140140
2004200420042004 2005200520052005IndustrialIndustrialIndustrialIndustrial MunicipalMunicipalMunicipalMunicipal2004200420042004 19%19%19%19%
81%81%81%81%74.2
57.4
16.6
72.0
S$’m
200520052005200556%56%56%56% 44%44%44%44%48%
Change in revenue mix
Municipal
Industrial
Industrial
Municipal
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Strong Revenue GrowthStrong Revenue GrowthStrong Revenue GrowthStrong Revenue Growth
2005200520052005
SG
26%
ME/OTH
18%
China
56%
2004200420042004
SG
10%
ME/OTH
8%
China
82%
� Revenue Drivers : Sustainable growth markets
– China, Middle East
4
7
11 1937 30
4314
27
44 59
88
0
20
40
60
80
100
120
140
2001 2002 2003 2004 2005
1H 2H
Strong Revenue GrowthStrong Revenue GrowthStrong Revenue GrowthStrong Revenue Growth
CAGR 40%
S$’m
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Strong Earnings GrowthStrong Earnings GrowthStrong Earnings GrowthStrong Earnings Growth
7.47.47.47.4 12.312.312.312.3 19.519.519.519.5 26.126.126.126.1 46.346.346.346.300001010101020202020
3030303040404040505050502001200120012001 2002200220022002 2003200320032003 2004200420042004 2005200520052005
PATMI
2.802.802.802.80 3.603.603.603.60 5.085.085.085.08 5.555.555.555.55 9.219.219.219.210000222244446666888810101010
2001200120012001 2002200220022002 2003200320032003 2004200420042004 2005200520052005
EPS
S$’m
CAGR 44%
Scts
CAGR 27%
5
9
PATMIPATMIPATMIPATMI
PATMI improved by 77% to S$46.3m
� Higher municipal sales from China, Singapore and Middle East
� After providing for investment for higher personnel and development costs to build future businesses
� Gains from divestments as part of asset-light strategy
� Implementation of FRS 39
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Consistent Returns on EquityConsistent Returns on EquityConsistent Returns on EquityConsistent Returns on Equity
23%23%23%23% 23%23%23%23% 23%23%23%23% 23%23%23%23% 24%24%24%24%0%0%0%0%10%10%10%10%20%20%20%20%30%30%30%30%40%40%40%40%
2001200120012001 2002200220022002 2003200320032003 2004200420042004 2005200520052005
ROE ROE ROE ROE
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Strong Cash PositionStrong Cash PositionStrong Cash PositionStrong Cash Position
Strong Cash position of Strong Cash position of Strong Cash position of Strong Cash position of S$96.4mS$96.4mS$96.4mS$96.4m
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Cash flow analysisCash flow analysisCash flow analysisCash flow analysis
(53%)137.864.7
Net cash generated from financing
activities
(58%)(114.7)(47.7)Net cash used in investing activities
158%7.018.0
Net cash generated from/ (used in)
operations
NM(0.0)0.1Payment of tax
156%7.017.9Cash generated from operations
(7%)33.330.8
Profit before working capital
changes adjusted for non cash
item
ChangeFY2004FY2005In S$’million
7
13
Healthy Cash flowHealthy Cash flowHealthy Cash flowHealthy Cash flow
� Net cash generated from operations increased 156% to S$18.0m
� Net cash used in investing activities decreased by 58% to S$47.7m– Proceeds from divestment and sale of building of S$44.6m– Offset by investment in associates, plant and equipment and
intangibles
� Net cash from financing activities decreased by 53% to S$64.7m– Proceeds from issuance of shares S$38.7m– Drawdown of project finance loan of S$35.1m– Partially offset by dividend payment and payment of short
term loans
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Healthy Debt Equity RatioHealthy Debt Equity RatioHealthy Debt Equity RatioHealthy Debt Equity Ratio
0.710.05Net debt to equity ratio (including
PF loan)
Net cashNet cashNet debt to equity ratio (excluding
PF loan)
-71.382.010.7Net borrowings
+35.1(61.3)(96.4)Less: Cash & cash equivalents
-36.2143.3107.1Total borrowings
-2.32.40.1Short term
+29.81.531.3Long term
-63.6139.475.8PF Loan*
Change
Restated
FY 2004FY 2005In S$’million
* * Limited resource project financingLimited resource project financing
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Impacts
– Understate earnings
– Volatility
– Understating of revenue
– Proportionate earnings recognition over economic life of assets
Implication on Accounting StandardsImplication on Accounting StandardsImplication on Accounting StandardsImplication on Accounting Standards
� FRS 102 Share-based payment
� FRS 39 Financial Instruments: Recognition and Measurement
� FRS 31 Interests in Joint Ventures
� FRS 27 Consolidated and Separate Financial Statements
� FRS 28 Investment in Associates
NO IMPACT
ON
CASHFLOW
Corporate Updates
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Singapore:Singapore:Singapore:Singapore: Tuas Seawater Desalination PlantTuas Seawater Desalination PlantTuas Seawater Desalination PlantTuas Seawater Desalination Plant
First Seawater Desalination Plant in Singapore
� 136,380 m3/day
�Total project cost – about S$200m
�Completed and delivered water into
PUB system since 4Q05
�Recurring income from sale of
water and O&M revenue for 20 years
from 4Q05
� Lowest water tariff price of S$0.78 cents/m3 in the world for desalinated water
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Divestment of SingSpringDivestment of SingSpringDivestment of SingSpringDivestment of SingSpring
� Completed the divestment of 50% equity stake in SingSpring Pte Ltd in 3Q05
� Financials of SingSpring would be consolidated proportionately into Hyflux’s Group accounts
� Reduce project finance debt
� Able to consolidate 50% of revenue from SingSpringand O&M income into Group’s account
10
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China: Desalination Plant (China: Desalination Plant (China: Desalination Plant (China: Desalination Plant (LiaoningLiaoningLiaoningLiaoning))))
LIAONING: Seawater Desalination
Plant in China
�50,000 m3/day, project cost about S$80 mil
�Supply of industrial grade water and potable water to municipality of Huludao for 30 years
�Construction commenced 3Q05 but is now on
hold due to
�Local government is reviewing site location for the plant
�Impact :-
�Completion target will be postponed till the local government finalise the site location
�No delay damages
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China: Desalination Project (China: Desalination Project (China: Desalination Project (China: Desalination Project (TianjinTianjinTianjinTianjin))))
TIANJIN: Largest Seawater
Desalination Plant in China
� 100,000 m3/day, project cost about S$154 mil
� Cooperative Agreement signed with People’s government of District of Dagang, Tianjin
�Ground breaking – Oct 05
�Target completion - end 2007/early 2008
�Plant expandable to 150,000 m3/day
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Middle EastMiddle EastMiddle EastMiddle East
Palm Jumeriah� 32,000 m3 /day x 2 desalination plants –
US$80 million
� Detailed engineering substantially
completed and procurement on-going
� Target completion – end 2006/mid 2007
DMCC
� 40,000 m3 /day sewerage treatment plant
for production of irrigation quality water
� Project on hold as customer is reviewing
the capacity requirement for the project Artist Impression of a RO Plant at Palm Jumeirah Island
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IndiaIndiaIndiaIndia
� Office set up in 2005, with 9 headcount in sales and marketing
� Potential Markets :– Desalination
– Waste Water Reclamation
– Consumer Product Sales
– Process and Filtrations ( Sugar, Pharmaceutical, Organic Acids, etc)
� Short term strategy: Focus on industrial projects and consumer products
� Medium term strategy: selective in undertaking municipal projects
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Awards and Accolades 2005Awards and Accolades 2005Awards and Accolades 2005Awards and Accolades 2005
Commendation at the Global Water Awards 2005Commendation at the Global Water Awards 2005Commendation at the Global Water Awards 2005Commendation at the Global Water Awards 2005The Seletar NEWater plant and the Chestnut Avenue Waterworks were highly commended at the Global Water Awards 2005, by Global Water Intelligence, UK.
Fastest Growing 50, 2005Fastest Growing 50, 2005Fastest Growing 50, 2005Fastest Growing 50, 2005Hyflux was awarded the “Fastest Growing 50” at the Fastest Growing (FG) 50 Certification Awards 2005, organized by DP Information Group, Ernst and Young, IE Singapore, and SPRING Singapore.
Winner of the Most Transparent Company Award 2005Winner of the Most Transparent Company Award 2005Winner of the Most Transparent Company Award 2005Winner of the Most Transparent Company Award 2005Hyflux netted the Most Transparent Company Award for the services/utilities/agriculture sector, at the Securities Investors Association Singapore (SIAS) Investors Choice Awards in 2005
Forbes Asia Forbes Asia Forbes Asia Forbes Asia –––– Best Under a Billion List 2005 Best Under a Billion List 2005 Best Under a Billion List 2005 Best Under a Billion List 2005 Hyflux was among 11 local firms that were ranked as one of 200 best
small companies in the region, by Forbes Asia magazine.
Growth Strategies
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Building for the FutureBuilding for the FutureBuilding for the FutureBuilding for the Future
26
Building for the FutureBuilding for the FutureBuilding for the FutureBuilding for the Future
� Implement sustainable growth strategy
� Positioning to build on recurring income stream
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27
Building for the FutureBuilding for the FutureBuilding for the FutureBuilding for the Future
Sustainable Growth Strategy– Identify and develop growth markets
• China, ME, India
– Build resources to tap growing markets• Funding growth
• Investment in human capital and setting up infrastructure
– Invest in R&D to develop and acquire new technology and niche applications
• Market expansion
• Remain competitive
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Low Debt Equity
Ratio of 0.04
Raise Equity (when needed)
to Increase Capacity to Fund Large
Projects
Set up vehicle for
post-completion
funding
�Such as business trust
or infrastructure
fund
Funding through
Mezzanine Entity
Optimize Capital
Structure
Debt � Asset light strategy
� Reduce risk exposure during construction
�Redeployment of capital
� Debt
� Asset light strategy
� Divest completed projects into trust/fund vehicle
� Allow redeployment of capital
� Debt
Funding GrowthFunding GrowthFunding GrowthFunding Growth
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29
SinoSpringSinoSpringSinoSpringSinoSpring
� Asset-light strategy
� Ease capital outlay
� Enable Group to build up portfolio of BOO/BOT projects
� Revenue from large turnkey projects
� Building up recurring revenue stream
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Personnel ResourcesPersonnel ResourcesPersonnel ResourcesPersonnel Resources
68268268268246546546546500002002002002004004004004006006006006008008008008002004200420042004 2005200520052005
No. of No. of No. of No. of HeadcountHeadcountHeadcountHeadcount���� 47%47%47%47% Non Non Non Non EngineersEngineersEngineersEngineers30%30%30%30% EngineersEngineersEngineersEngineers70%70%70%70%
DiplomaDiplomaDiplomaDiploma22%22%22%22%Below Below Below Below DiplomaDiplomaDiplomaDiploma30%30%30%30% PHDsPHDsPHDsPHDs2%2%2%2% General General General General DegreeDegreeDegreeDegree34%34%34%34%
Masters Masters Masters Masters DegreeDegreeDegreeDegree12%12%12%12%� ���� Sales & Sales Support HC ���� 38% to 90
� ���� R&D HC ���� 33% to 85
� ���� Operations and Production HC ���� 47%to 405
477
205
207
84
13
226
152
16
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Building for the FutureBuilding for the FutureBuilding for the FutureBuilding for the Future
Positioning to build on recurring income stream
– Focus on BOO/BOT projects with long term recurring income
– Reduce revenue volatility
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Building up Recurring IncomeBuilding up Recurring IncomeBuilding up Recurring IncomeBuilding up Recurring Income
0%0%0%0%10%10%10%10%20%20%20%20%30%30%30%30%40%40%40%40%50%50%50%50%
NowNowNowNow Medium TermMedium TermMedium TermMedium Term Long TermLong TermLong TermLong Term
% of Recurring Income to Total % of Recurring Income to Total % of Recurring Income to Total % of Recurring Income to Total RevenueRevenueRevenueRevenue10% 10% 10% 10% ---- 20%20%20%20% 30% 30% 30% 30% ---- 40%40%40%40%
2%2%2%2% 3333---- 5 yrs5 yrs5 yrs5 yrs > 5 yrs> 5 yrs> 5 yrs> 5 yrs
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Portfolio of BOO / BOT ProjectsPortfolio of BOO / BOT ProjectsPortfolio of BOO / BOT ProjectsPortfolio of BOO / BOT ProjectsSecured Projects Target Completion
Singapore
1 Desalination Plant 136,380 m3/day Completed
China
4 Wastewater Treatment Plants 90,000 m3/day 2006
2 Desalination Plants 150,000 m3/day 2007 - 2008
1 Water Clarification / Recycling 20,000 m3/day 2006 - 2007
260,000 m3/day
Dubai
1 Wastewater Treatment Plant 40,000 m3/day on hold
2 Desalination Plants 64,000 m3/day 2006 - 2007
104,000 m3/day
Total (11 projects ) 500,380 m3/day
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Portfolio of BOO/BOT projectsPortfolio of BOO/BOT projectsPortfolio of BOO/BOT projectsPortfolio of BOO/BOT projects
When all the plants (500,380 m3/day) are fully operational in 1 – 3 years time, recurring income stream approx S$ 80 – 90 million/year for the next 20 – 30 years
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35
Portfolio of BOO/BOT projectsPortfolio of BOO/BOT projectsPortfolio of BOO/BOT projectsPortfolio of BOO/BOT projects
TARGETTARGETTARGETTARGET
To achieve operation of To achieve operation of To achieve operation of To achieve operation of 1,000,000 m3/day 1,000,000 m3/day 1,000,000 m3/day 1,000,000 m3/day
in 3 in 3 in 3 in 3 –––– 4 years4 years4 years4 years
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How did we progress in 2005How did we progress in 2005How did we progress in 2005How did we progress in 2005
� Expanded portfolio of municipal projects globally
� Invested in human capital
� Funding growth – divest assets
� Built up recurring income stream
� Commercialize certain R&D applications
Organic acid industry
China and Middle East
Personnel increase from 465 to 682 employees
Building sale, Singspring and Sinospring
Completed Singspring and Changshu project
Progress achieved in 2005
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37
Building for the FutureBuilding for the FutureBuilding for the FutureBuilding for the Future
In the short term,
� revenue may continue to be lumpy on a quarter to quarter basis
� earnings will be affected due to investment costs in building up resources to generate future income
Business Outlook
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China Water China Water China Water China Water
CrisisCrisisCrisisCrisis
China is "facing a water crisis moresevere and urgent than any other country in the world."
-Qiu Baoxing, Vice-minister of Construction International Conference for China Urban Water Development Strategies
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41
Decreasing Water SupplyDecreasing Water SupplyDecreasing Water SupplyDecreasing Water Supply
� Water shortage and water pollution are the two major problems in China’s urban water supply.
� Shortages cost US$24.2 billionin estimated losses in industrial output a year
� Pollution costs China 8-12% of its GDP annually through direct damage etc.
China Water Sector Report
42
Recent Industrial AccidentsRecent Industrial AccidentsRecent Industrial AccidentsRecent Industrial Accidents
� String of Water Pollution Crises recently:
– Benzene spill in SonghuaRiver, Harbin, Nov 2005
– Cadmium pollution in BeiRiver, Guangdong, Dec 2005
– Diesel oil leak in Yellow River, Henan Province, Jan 2006
– Cadmium pollution in XiangRiver, Hunan Province, Jan 2006
� Served to heighten urgency of need to protect water resources
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43
Cohesive PolicyCohesive PolicyCohesive PolicyCohesive Policy
� Policy on water conservation transcends all government levels:
� State Council’s “7 Key Missions” released on 14 Feb 2006 highlighted ‘drinking water safety as highest priority
– Central government’s most explicit directive
� National Development and Reform Commission (NDRC)– “Water Conservation Policy Outline”
– Products made from wastewater (liquid) could enjoy reduced tax rates according to national policies
– Enterprises that produce fresh water from recycled water and seawater are entitled to enjoy preferential policies
– Water conservation techniques and equipments could receive government funding
http://en.ndrc.gov.cn/policyrelease/t20050621_8427.htm
44
Water Diversion (Water Diversion (Water Diversion (Water Diversion (南水北调南水北调南水北调南水北调))))
� Water Inequality:
– North is very arid, South is slightly better but has of late suffered from pollution as well
� US$59 billion dollar project underway to divert southern water to northern cities
� Meant to deliver 44.8 billion cubic meters of water upon completion in 2050
� High costs - More than US$1.32 per m3 even before treatment.
� Announced that water would cost Beijing 7 yuan per tonne when project completed*
� Water prices for desalinated water from our Tianjin Dagang Desal Plant are lower.
*Zai Houhai, Deputy Minister, MOH
23
India Water India Water India Water India Water
MarketMarketMarketMarket
“India faces a turbulent water future.The current water development and water management system is not sustainable”
-John Briscoe,Senior Water Specialist World Bank
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47
India India India India –––– Alarming shortageAlarming shortageAlarming shortageAlarming shortage
<1000 m32025
2,464 m31990
5,277 m31955
Est. renewable fresh waterYear
Categorization:Renewable fresh water availability < 1700 m3/ per capita/ annum: Water Stress
Renewable fresh water availability < 1000 m3/ per capita/ annum: Chronic Water Scarcity
Alarming decline
Source: Water Privatization and Implications, Sampath et al, JPMorgan
48
India India India India –––– Compelling Growth StoryCompelling Growth StoryCompelling Growth StoryCompelling Growth Story
� Great demand for water:
– 2nd largest population in the world
– 4th largest economy in the world (PPP)
– Rapid growth in economy and population
� Indian PM, Dr Manmohan Singh, most recently called for PPP to fund US$250bn worth of infrastructure projects, over the next five years to feed such demand
TWSJ 13/01/06
25
49
India India India India –––– Growth DriversGrowth DriversGrowth DriversGrowth Drivers
� Recent water supply cut to South Delhi due to raw water shortage from Haryanan source serve to heighten urgency
� Industry water withdrawal estimated to hit 118 cubic km in 2020, roughly 236 times Singapore’s current water needs
� Hyflux well poised to serve industrial sector. We target:
– Petrochemical industry
– Textile industry
– Sugar Industry
– Pharmaceutical industry
The Times of India 16/02/06Global Water Intelligence
MembraneMembraneMembraneMembrane
MarketMarketMarketMarket
26
51
MembranesMembranesMembranesMembranes
� Market research points to 15% growth in global membrane market through to 2020
� Growth to be especially strong in municipal and industrial sectors
� Hyflux’s key markets – India and China poised for robust growth
� Annual sales of China’s membrane market projected to hit $2.47 bn in 2015, 10% – 15% of world market
– Ultrafiltration (UF) and microfiltration(MF) together account for 20%revenueGlobal Water Intelligence-McIlvane-Frost & Sullivan-Membrane Industry Association of China
52
High Temperature Solvent Resistant
Eg. Sugar Juice Purification
Ethanol / Water Separation
High Temperature High Corrosive
Eg. Lubricant & Paper Mills
Solvent Purification In Pharmaceutical & Electronic Industries
Eg. Methanol IPA
Disposable Filter
Eg. Lab Use
Critical Filtration
Eg. Lab Use in Medicine & Semiconductor Industries
Organic Acid Purification
MBR Membrane Contactor Degassing
Pre-filtration Waste Water Treatment
HyfluxHyfluxHyfluxHyflux Membrane ApplicationsMembrane ApplicationsMembrane ApplicationsMembrane Applications
27
Growing Order BookGrowing Order BookGrowing Order BookGrowing Order Book
54
Growth in Order BookGrowth in Order BookGrowth in Order BookGrowth in Order Book
234234234234 4654654654656262626200001001001001002002002002003003003003004004004004005005005005006006006006002003200320032003 2004200420042004 2005200520052005
Order Book $’m
� Municipal = S$327 mil
(Outstanding project cost : S$395 mil)
� Industrial = S$138 mil
� Recurring = S$20 mil –––– S$30 mil
� MOU
� ME - S$498 mil
� China - Harbin - S$ 700 mil
- Chang Chun - S$ 160 mil
���� 99%99%99%99%
28
On track to deliver another On track to deliver another On track to deliver another On track to deliver another year of growthyear of growthyear of growthyear of growth
Thank YouThank YouThank YouThank You
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Q&AQ&AQ&AQ&ASessionSessionSessionSession