Fresh water is essential for life, but it is a scarce resource, with less than 1 percent of the world’s water supply estimated to be fresh water readily available for humans.
Increased demand from a rising global population, climate change and associated water pollution are likely to see already scarce freshwater resources become even more stretched in the near future.
For Canaccord Genuity, these water quality trends are likely to continue, and will underpin large addressable global markets for water treatment solutions, which are key to help offset clean water scarcity by treating and ultimately reusing more water.
“Treated wastewater is increasingly seen as a reliable alternative to conventional water resources,” analysts at the firm told their investor audience in a note. “There are now many processes that can treat wastewater to almost any standard, whether it be to produce drinking-water quality, or to a standard necessary for re-use in industry, or to a level required for safe disposal.”
In the report, the firm highlights five micro-cap ASX-listed water treatment stocks to watch that are providing innovative solutions to help address the water scarcity issue.
Here, the Investing News Network takes a look at what these five companies are all about. All data was current as of June 18, 2020, and companies are listed in alphabetical order.
1. Calix (ASX:CXL)
Current stock price: AU$0.76; market cap: AU$112 million
Calix’s core technology is being used to develop more environmentally friendly solutions for advanced batteries, crop protection, aquaculture, wastewater and carbon reduction. The company has operations in Australia, New Zealand, the US, Europe and Asia, and currently generates sales from commercialised products for water treatment and sewer protection.
According to Calix, its technology provides benefits such as a safe and cost-effective way to manage odour and remove contaminants in wastewater, greater yields in aquaculture and agriculture, improved batteries at lower costs and an enhanced ability to meet emissions targets.
“Subject to exchange rates, Calix expects total sales revenue for FY20 to be within the range of AU$12.5 million to AU$14 million , representing a 3.8 to 4.2 times uplift from FY19,” the Canaccord analysts said. “The watchpoint on sales is the SE Asian region, where the impact of COVID-19 is yet to be determined.”
2. De.Mem (ASX:DEM)
Current stock price: AU$0.16; market cap: AU$26.3 million
An Australian-Singaporean decentralised water and wastewater treatment business, De.Mem designs, builds, owns and operates turnkey water and wastewater treatment systems for its clients.
Operating in the industrial segment, it provides systems and solutions to municipal and residential customers from the mining, oil and gas, electronics, chemicals and food and beverage industries.
“With about 60 percent of revenues currently sourced from Queensland, the company is initially focused on expanding its presence throughout the Australian market,” the report notes. “The company believes the size of the addressable market for its offering in Australia is around $200 to $300 million.”
3. Fluence (ASX:FLC)
Current stock price: AU$0.26; market cap: AU$156.21 million
Fluence is focused on the decentralised water, wastewater and reuse treatment markets. It offers low-cost, fast-to-deploy water and wastewater treatment products that solve local water shortages.
The market for decentralised systems utilising pre-engineered water and wastewater treatment/reuse products is estimated to be worth $13 billion, according to Global Water Intelligence, with demand for smart packaged water plants growing globally.
“Fluence is targeting geographies that urgently need wastewater treatment solutions and/or are urgently addressing extreme water shortages,” the Canaccord analysts said.
Fluence has established operations in North America, South America, the Middle East, Europe and China, and has experience operating in over 70 countries.
4. Phoslock Environmental Technologies (ASX:PET)
Current stock price: AU$0.36; market cap: AU$215.63 million
Phoslock Environmental Technologies is an international environmental company specialising in engineering solutions and water treatment products to remediate polluted lakes, rivers, canals and drinking water reservoirs.
Its leading product, called Phoslock, was developed by the Commonwealth Scientific and Industrial Research Organisation to significantly reduce excess phosphate safely from the environment and in turn reduce the growth of harmful algae. Phoslock is certified to be used in drinking water in North America, Europe, the UK, Brazil, Australia and China.
The company has a purpose-built production facility in Changxing, China, with a capacity of 20,000 tonnes per year and expansion plans in the works.
“The addressable market for PET is significant,” Canaccord’s report reads. “In China, the government has allocated over US$1 trillion in the latest five-year plan to address water, air and soil pollution.”
5. SciDev (ASX:SDV)
Current stock price: AU$0.58; market cap: AU$89.45 million
SciDev is focused on the separation of solids from liquids in a variety of industries, including mining, water treatment, oil and gas and construction.
“SDV has stated that it has a strong growth pipeline and believes it is well positioned to deliver sustainable growth,” Canaccord said. “SDV also could expand into adjacent industries that have a need for solids-liquid separation, including dairy, food & beverage, paint, waste management and cosmetics.”
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.