SINGAPORE (Aug 10): OCBC Investment Research has ceased coverage on water and energy solutions provider Hyflux.

“Due to the still muted medium-term prospects as well as a reshuffling of internal resources, we are ceasing coverage on the company,” says OCBC lead analyst Carey Wong in a report on Aug 5.

In 2Q, Hyflux’s net profit after tax (NPAT) dived 90% y-o-y to $2.6 million.

“After adjusting for perpetual securities dividend, it would have posted a net loss of 1.6 cent per share, versus an EPS of 1.7 cent in 2Q15,” Wong says.

In addition, Hyflux cut its declared interim dividend for 1H16 to 0.2 cent, down from 0.7 cent paid out in 1H15.

Despite a 174% y-o-y surge in revenue to $260 million, the weaker 2Q16 results were mainly attributed to lower gross margins, which fell to 28%, from 75% in the same quarter last year.

“Hyflux continues to expect weak financial performance from its Tuaspring power plant in 2H16, citing still weak electricity prices and higher amortisation and financing costs,” Wong says, adding that this could have “an adverse near-term impact on profitability”.

While it currently sits on a sizeable order book of $3.1 billion, Hyflux remains cautious about its business outlook, on the back of sustained low oil price environment and economic uncertainties arising from Brexit.

As at 11.03am, Hyflux is trading 0.9% lower at 53.5 cents.