H20 purifier Fluence asks investors: water you waiting for?
Health & Biotech
Health & Biotech
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Water purifier Fluence is a company everyone wants to love — except investors, apparently, who are keeping its share price at all-time lows.
New York-based Fluence — which makes low-energy, water treatment systems — is plugging along at 69c, near the bottom of its 52-week trading range.
That’s despite analysts saying the combination of a US commercial operation with “blue sky” Israeli tech is the next big thing.
Fluence (ASX:FLC) is the love child of RWL, a passion project of cosmetics heir Ronald Lauder, and former ASX-listed Israeli firm Emefcy.
The two merged in July to become Fluence (ASX:FLC), joining a handful of listed water companies in Australia.
Quick-to-set-up, cheap solutions
Fluence operates a number of activities.
It makes off-grid wastewater treatment systems for municipalities in China and North America, using containerised modules based on Emefcy’s membrane aerated biofilm reactor (MABR) technology (see the video below for an explainer).
It offers waste-to-energy, water purification and water recycling products for industry in Latin America.
And it does water desalination and purification in Africa and the Middle East, using containerised mobile units called ‘Niroboxes’.
Fluence specialises in quick-to-set-up, cheap solutions for large-scale use.
In Melbourne on Wednesday, chairman Richard Irving and chief executive Henry Charrabé said they’re on track for a $US90 million ($115 million) revenue target this year.
That figure is based on winning contracts for the MABR wastewater package in China — of which 10s of individual units have been “booked”. (China’s waste water market is a $US15 billion opportunity, Fluence believes.)
The revenue target also relies on higher global sales of containerised plants that can be sold under build-operate-transfer or water reuse-as-a-service contracts.
Mr Irving says it’s taking a little longer to convince governments and businesses of the pay-as-you-go model, but they are converting customers to Fluence’s new way of thinking.
They expect to maintain 20 to 30 per cent yearly revenue growth — supplemented by deals like one with with “an African nation” to build a $US100 million revenue drinking water plant — to take the company to profitability in 2019.
The China challenge
Money, says Henslow analyst James Emonson, is not a problem. Executing in China might be.
A $US10 million strategic investment from a single new shareholder in August was largely to bring a new, stable investor onto the register. At the end of June Fluence had $15 million to play with.
Mr Emonson wrote last year that Fluence predecessor Emefcy was addressing China with an “approach [that] has been systematic and structured”.
Mr Irving says that while the proprietary MABR system may be copied “in time”, they are well protected outside China.
With a suite of technologies that can, according to Fluence, solve pretty much any water problem at a low cost, Mr Charrabé says staying focused on the core business may be a challenge.
“We’re not selling everything to everybody, which is a typical big conglomerate approach,” he said, preferring to sell one or two thematic products in each market.
Australia has at least six listed companies dealing in the kinds of waterworks Fluence does — all chasing a piece of a $700 billion global market.
But most receive patchy attention from Australian investors.
The best performing water company on the ASX is now involved in the resources sector rather than strictly water.
CleanTeq (ASX:CLQ) is up 150 per cent this year to $1.28.
CleanTeq began as a wastewater treatment company, before discovering that its technology was perfect for extracting strategic metals from slurries and mine tailings. It’s gone all-in on metals by launching the Syerston Nickel Cobalt Scandium Project in NSW.
An agreement with Asia’s largest water remediation company turned Phoslock’s (ASX:PHK) stock around in May, sending its shares up 107 per cent this year to 18.5c.
But De.mem (ASX:DEM), which undertook a company-transforming deal just after Fluence did, is still waiting for investors to realise it exists. It’s actually down 30 per cent for the year to 31.5c.
Water Resources Group (ASX:WRG) is down 50 per cent to 0.1c and SciDev (ASX:SDV) is flat at 1.6c.