HWT – BT

Hyflux Trust first-half DPU rises 4%

Interim period saw distributable cash of $4.5m

HYFLUX Water Trust (HWT), the first pure-play global water business trust to be listed in Asia, yesterday reported distributable cash of $4.5 million for the first half of the year.

This translates to distribution per unit (DPU) of 2.17 cents – 4 per cent higher than the forecast 2.09 cents. Based on yesterday’s closing price of 63.5 cents per unit, the DPU works out to an annualised yield of 6.8 per cent.

However, HWT is forecasting full-year DPU of 4.88 cents, reflecting a yield of about 7.7 per cent, and the trust said it expects to meet the forecast.

For the second half of the year, utilisation rate of its water treatment plants is expected to increase, while more plants will be completed, the trust said.

‘We are pleased that HWT has exceeded its forecast for its first distribution,’ said Saud Siddique, chief executive of the trustee-manager. ‘HWT’s performance is underpinned by the positive outlook in the water industry in China, and the strong fundamentals of our projects.’

Mr Siddique said that of the trust’s initial portfolio of 13 water treatment plants in China, 10 are in operation while the rest will be finished by the year-end.

There are no comparison figures for the previous period as the trust’s portfolio was constituted only late last year. The trust distributes cash every six months.

For the quarter ended June 30, HWT reported total revenue of $16.7 million and net profit of $2.2 million.

This was double the Q1 net profit of $1.1 million on lower trust expenses, hedging and forex gains, said Grace Goh, HWT’s chief financial officer and chief investment officer.

Nine plants from sponsor Hyflux Limited with total capacity of 290,000 cubic metres a day are now being considered for injection into the trust and HWT is on target to submit the proposed injection to unitholders for approval by November this year, Mr Siddique said.

‘We are focusing on growing the asset base as fast as possible. As we bulk up we will become more attractive to a wider investor base,’ Mr Siddique added. In all, Mr Siddique said, the trust has a ROFOAR (right of first refusal and right to match) pipeline from sponsor Hyflux of 20 projects totalling 815,000 cubic metres a day, spread over seven provinces in China.

He added that the trust, which now has no gearing, is actively seeking debt financing to expand its portfolio of water treatment plants.

HWT has secured a committed three-year revolving credit facility of US$66 million with an interest margin of Libor/Sibor plus 98 basis points.

The trust is targeting up to 50 per cent gearing, using debt from banks rather than bonds, Mr Siddique said, and it may look to equity financing once that threshold is reached.