On 16 December, the second asset injection into Hyflux WaterTrust (HWT) was approved by HWT’s unit-holders at its EGM.

HYF and HWT had made a joint announcement on 31 October forthe divestment/sale of five plants with a total capacity of 160,000cu m/day valued at S$88 mn. We estimate the divestment gain forHYF is ~S$14 mn (less HYF’s 31.5% stake), based on 1.3x P/B.

With the go-ahead, this re-affirmed HYF’s capital recycling modeland provides an additional source of funding especially in thecurrent credit crunch environment and allows HYF to furtherstrategically capitalise the growth especially in China and Algeria.

Our SOTP target price is S$2.63 (from S$2.67) following changein HWT’s target price (to S$0.60 from S$0.74). Within theSingapore water sector, HYF remains our top pick for itsdiversified exposure to the water value chain, track record andcredit availability. Key catalysts include continued order flow todrive share price, especially larger-scale construction (EPC)projects, better-than-expected order wins and improved costcontrols.