Hyflux Ltd (the “Company”) is pleased to announce that, following the
announcement on 26 October 2005, SinoSpring Utility Ltd (“SinoSpring”), its 50%-
owned company, has reached substantial agreement on the terms of a proposed
investment by International Finance Corporation (“IFC”), the commercial lending
arm of the World Bank, in SinoSpring.

The proposed investment is for IFC to take a preferred equity interest in
SinoSpring of up to US$20 million.

SinoSpring is set up to develop and own BOT/BOO (build, own and transfer or
build, own and operate) projects in the treatment of water, seawater and
wastewater in China. Its current shareholders are RB (Labuan) Ltd (50%) and the
Company (50%). These present shareholders envisage that the Company will retain
its 50% equity in SinoSpring after IFC’s proposed investment.

Commenting on the proposed investment, Ms Olivia Lum, Group CEO and President,
said, “We are glad that, after extensive due diligence over several months, IFC
has decided in principle to invest in SinoSpring. We believe that IFC will be a
valuable partner in supporting our growing business in China and elsewhere such
as India. Such collaboration opens up for us another source of capital (both
equity and debt) and expertise. With this arrangement, we will be able to
continue to strengthen our strategy to build projects with long term recurring
revenue stream in China and other markets.”

SinoSpring through its subsidiaries is currently executing the following 8
projects in China:

(a) a 100,000 m3/day seawater desalination plant in Dagang, Tianjin
province;
(b) a 50,000 m3/day seawater desalination plant in Huludao, Lianning
province;
(c) four wastewater projects totaling 90,000 m3/day in Jiangshu
province;
(d) a 20,000 m3/day river water clarification plant in Yangkou, Jiangshu
province; and
(e) a 30,000 m3/day reservoir water treatment plant in Lushan, Henan
province.

This proposed investment is subject to the final approval of the managements
and the boards of directors of IFC, SinoSpring and the Company.

[MISC Announcement Title]
PROPOSED INVESTMENT IN SINOSPRING BY IFC


Provider ID: 53526fb23a2d0085482571410021590d
-0- Mar/30/2006 6:51 GMT

Hyflux made two separate announcements yesterday. In the first announcement, Hyflux said that its 25% associate company had been awarded a concession to supply 30,000 tonnes per day of drinking water to Lushan county in Henan Province, for a period of 29 years from 2005. Hyflux's wholly owned subsidiary Hyflux NewSpring Construction Engineering (Shanghai) will be involved in the EPC work estimated at a value of S$11.3m. In the most optimistic scenario, assuming that Hyflux NewSpring is the only company undertaking the EPC work and is able to capture a net margin of 20%, the EPC contract will have less than S$1.7m impact on Hyflux's bottom line, while the concession will most likely contribute around S$0.3m of net profit to Hyflux's bottom line since FY07. Compared with Hyflux's net profit of S$46.5m in FY05 and its projected growth of 30% CAGR until 2008, the impact of the contract announced on Hyflux's bottom line in FY06 will be at most 3.6% of Hyflux's FY05 net profit, and the recurring net profit of S$0.3m from the associate company since FY07 is not considered material at all.

In the second announcement, Hyflux announced that SinoSpring, its 50% owned JV with RB (Labuan) had reached substantial agreement on a proposed "investment" by International Finance Corporation ("IFC"), the commercial lending arm of the World Bank. The proposed "investment" is for IFC to take a preferred equity interest in SinoSpring of up to US$20m. Hyflux will retain its 50% equity stake in SinoSpring after IFC's proposed "investment". Our take on this development is that the "investment", if it is an investment in the equity stake of the JV, will likely alleviate the financial burden on the JV to fund the 8 projects currently in execution, and may help the JV to get the financing for future projects. However, we would rather view this "investment" as a loan to Hyflux's JV, since according to the announcement IFC will just take a "preferred equity interest", which is not a direct equity interest in SinoSpring. We are not able to reach the management for clarifications on the details of the "investment". At the last closing price of S$2.70, the stock is estimated to be trading at 30.8x FY06 P/E, 26.4x FY07 P/E, and around 6x FY06 P/BV. We maintain our view that the stock is overvalued. SELL with fair value tentatively unchanged at S$2.24. (Jiewen Deng)



Best Regards,
Jiewen Deng
Investment analyst
Phillip Securities Research Pte Ltd