Water treatment specialist Fluence (ASX:FLC) today announced it had won a contract to develop a water treatment facility based on its newly released SUBRE product.
Located in Sichuan Province, the greenfield project will treat up to 1,200m3 of wastewater per day and will conform to China’s stringent Class IV standards. The order was placed by Fluence’s local partner, Sichuan Development Guorun Environmental Investment Co., and is scheduled for completion before the end of 2019.
No financials were provided in the company’s ASX announcement, but China has long been touted as a substantial opportunity for Fluence with the government’s latest 5-year plan allocating $15 billion in funding for local wastewater treatment. This latest SUBRE sale is the second in as many months, with the solution being launched in March.
Is Fluence a Buy?
Fluence is still a loss making entity, although the company recently reiterated expectations for “sustainable EBITDA profitability” by the fourth quarter of 2019. Its smart packaged solutions are expected to show growth of around 18% and the company claims a US$278 million order backlog.
On a trailing 12 month basis, the company presently trades on a price to sales of roughly 2x. The business has around US$13 million of cash on hand, and although it managed to lose US$22.5 million in operating cash in the latest half Fluence remains confident it has enough cash to see it through to breakeven.
The company continues to earn a significant amount of revenue from more traditional water treatment projects, which tend to be very lumpy in nature. The business is also reasonably capital intensive.
Nevertheless, the demand for water treatment globally is rising fast, and Fluence has a unique product set that is patented, fast to install, cost effective to run, and highly reliable. If it can continue to win contracts such as these, and at a sufficient pace, the current share price may well appear attractive.
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