The water stocks foreigners love and the ones that are just splashing around
Food & Agriculture
Treading water (caption)
Purifloh is the latest Aussie water company that a rich, famous foreigner has taken a shine to, but it’s still not a sector that inspires Australian investors.
Only two of the eight water companies that Stockhead monitors has seen their share price consistently climb over the last 12 months — China-focused water cleanup service Phoslock (ASX:PET) and water rights investor Duxton Water (ASX:D2O).
>> Scroll down for a table of the eight.
Phoslock posted a maiden profit — 16 years after it was founded — at the start of this year. Its shares have been rising for the last two years, up 335 per cent.
It uses a phosphate-based water treatment to clean large bodies of water.
Duxton Water buys water rights and leases them to land owners. Water rights prices have been rising every year since 2013, but the drought is driving them up. Their stock is up 27 per cent over the last year.
According to the Ministry of Agriculture and Water Resources allocations, or entitlements as they’re also known, topped $4000 a megalitre in two popular Murray-Goulburn areas in September, and $5000/ML in Murrumbidgee in NSW.
But a range of other companies are yet to turn demand for water into demand for their companies.
Phoslock managing director Robert Schuitema puts it down to a lack of water problems in Australia, making the issue largely out of sight, out of mind.
“By world standards we don’t have big problems, that’s the reality,” he told Stockhead.
He says water quality is managed very well in Australia outside a few isolated locations such as Lake Burley Griffin in front of Parliament, in Canberra, which consistently suffers from algal blooms.
Whereas overseas, such as in China where Phoslock and Fluence (ASX:FLC) have operations, black, polluted and dead water is much more common and obvious to the average person.
Foreign investors *love* Aussie water
For five years water and air purifier Purifloh’s share price did nothing.
Then it bought a licence to new water treatment technology from US company Somnio Global last year, changed its name, and secured a billionaire American investor who paid five times the share price for a 17 per cent stake.
Its stock is still rising, up another 69 per cent on Tuesday to $3.12 after a research report by Beer & Co put an ambitious $20 target on the share price.
It is not the only water stock to enjoy the favours of foreign investors. In fact, based on Stockhead research into substantial shareholder registers, foreign investors are most likely to be among the largest holders of ASX water stocks.
Fluence (ASX:FLC), thanks to the merger between ASX-listed Emefcy and New York-based global water company RWL Water, has several US funds as major shareholders. Ron Lauder — American heir to the Estée Lauder empire — is the largest.
Despite consistent activity for over a year, investors are still steering clear of the water treatment business, which researcher Edison suggests could be due to missed financial year guidance last year.
Phoslock’s number two shareholder, after chairman and South African-Australian investment guru Lawrence Freedman, is Zhigang Zhang, an executive at a subsidiary of Beijing Enterprises Water Group, who has been helping Phoslock set up the China business.
Clean Teq (ASX:CLQ), which adapted its water filtration tech to filtering minute traces of pricey metals from slurries at mining sites, counts Canadian mining celebrity Robert Friedland as its top investor and a Chinese fund at number two.
And water treatment technology De.Mem (ASX:DEM) has a Singaporean venture investor as the 50 per cent shareholder.
The yet-to-launch water companies
Had Purifloh (ASX:PO3) not landed its billionaire investor, it too would be among the companies whose shares are underwater.
De.Mem, SciDev (ASX:SDV) and Clean Teq are all wallowing.
De.Mem chief Andreas Kroell says the market and investors’ aversion to small caps right now is holding his company back, in spite of the encouraging quarterly figures released last month.
Cash receipts are up, cash burn is down, and the Australian business De.Mem bought last year is backstopping it all as they pick up industrial and mining water treatment projects, the last of which was a $570,000 contract in NSW.
SciDev is also aiming for the mining sector, having successful sold the polymer wastewater treatment tech into the dairy sector, while Clean Teq has been weighed down by the decision to develop their own nickel-cobalt-scandium project in NSW.