Expands into Libya. Hyflux Ltd has just announced a new MOA (Memorandum of Agreement) with the General Desalination Company (GDC) - the commercial arm of the Ministry of Utilities in Libya to for a number of JV companies to develop two seawater desalination plants. The first would be a plant with a minimum design capacity of 500k m3/day in east of Tripoli - possibly the largest membrane-based plant in the world; the second will have a minimum design capacity of 400k m3/day in Benghazi. We understand that the MOA was a result of nearly nine months of talks between Hyflux and GDC and Hyflux was selected due to its technological edge as well as value proposition.

No immediate financial impact. Although Hyflux has provided a brief outline of the likely JV - which is pretty similar to the one adopted for its projects in Algeria, other details (including the project value) are still sketchy at this stage. As it may take several months before the actual agreement is signed, we do not expect the Libyan projects to have any immediate financial impact. But we estimate that the project value of the two projects should easily exceed S$1b (to as much as S$1.5b) and would bump up Hyflux's order book for the next three years.

Awards US$28m contract for Magtaa. Earlier, Hyflux awarded a contract worth US$28m to ABB for it to supply electrical equipment for its Magtaa project in Algeria - currently the world's largest membrane-based reverse-osmosis seawater desalination plant. According to reports, ABB will set up a 220kV outdoor substation to provide power to the facility and it will also supply power transformers, medium-voltage drives and medium and low-voltage switchgear. Separately, Hyflux has also signed a MOU with ABB to collaborate on energy efficiency technologies and solutions.

Raising fair value to S$2.52. We believe that the latest geographical expansion into Libya is an important milestone for Hyflux and would further serve to showcase its technologies to the rest of the world, and should result in more project wins. Meanwhile, we are keeping our FY09 and FY10 estimates unchanged until we get better clarity on the two projects. Nevertheless, due to the positive development and the recent re-rating of the equity market, we raise our valuation from 18x FY09F EPS to 20x blended FY09/10 EPS and our fair value from S$$2.11 to S$2.52. Maintain BUY.