Consensus community valuation
$0.460
Average Intrinsic Value
141.8%
Undervalued by
Active Member Straws
#Personal Opinion
Last edited 2 months ago

#Water Consumption is forecast to double by 2050.

#The production of biofuels has also increased sharply in recent years, with significant impact on water demand. Between 1,000 and 4,000 litres of water are needed to produce a single litre of biofuel.

#Almost 80% of diseases in so called "developing" countries are associated with water, causing some three million early deaths. For example, 5,000 children die every day from diarrhoea, or one every 17 seconds. Demand for freshwater is increasing by 64 billion cubic meters a year (1 cubic meter = 1,000 litres).

 

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#ASX Announcements
Added 5 months ago

Melbourne, New York 13 March 2020

Fluence Corporation Limited (ASX: FLC) is pleased to announce that it has entered into a new strategic market segment and new province with an Aspiral TM sale to Beijing China Railway Science New Technology Co. Ltd. for a project involving  the Chinese Railway System in Inner Mongolia.

Utilizing Fluence’s proprietary MABR technology, this Smart Products Solution consists of an Aspiral™ L3 unit to treat an initial 35m 3/day of highly concentrated wastewater. The wastewater is unusually high in nitrogen, similar to Fluence’s Hubei highway Systems project s and, once treated, will meet standards equivalent to China ’s Class 1A effluent requirement . Fluence’s MABR technology has demonstrated its ability to comply with the required effluent standards in previous extreme cold temperatures, while maintaining treatment fidelity.

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#Bear Case
Last edited 4 weeks ago

08-July-2020:  I can see why FLC might look like rediculously good value at around 20 cents per share, but their chart is truly horrible, and they are very exposed to China - who may well still be trying to punish Australia for daring to ask for an inquiry into the origins and early response to COVID-19. I have been out of FLC for a long time now, and haven't been following them very much. I also removed them from my Strawman.com scorecard some time ago because I saw little reason why their SE SP trajectory was going to suddenly change and head north again. I removed PET recently for much the same reasons. A small Australian company with too much invested in China at the wrong time.

Other issues specific to FLC, in my opinion, include:

  1. Most of the board and management have exposure via options rather than direct shares. Only their Chairman has a decent holding - 37.265 million shares. Their CEO/MD, Henry Charrabe, has 12.35 million options, but no shares. Two NEDs (non-executive directors) have half a million shares (currently worth only around $100K) and three directors (half of their 6-member board) hold no shares (just options), which includes Mr Charrabe.
  2. The global adoption of their water-purification tech has been less than impressive.
  3. There was a lot of hype in prior years, and it seems to me that the hype was entirely unjustified.
  4. They are a small microcap company with a market cap of only around $130m, and they keep raising more money - so are regularly asking their shareholders to tip in more and more money, as their profitability timeline keeps getting pushed out further and further. They had less than $17m of cash at March 31, 2020.
  5. Last month they said, "Despite the delay in receiving the payments from the Ivory Coast Project, the Company expects operating cashflow for Q2 2020 to converge towards cash-flow breakeven. The expected improvement in operating cash flow in Q2 2020 compares to a US$7.9 million operating cash OUTFLOW in Q1 2020, and reflects the ongoing focus on lowering overhead costs and strong cash collections." More positive spin, but little actual real progress, in my opinion.
  6. I jumped on them in prior years as a momentum play, and, unfortunately, the momentum is all going the wrong way now, so I'm not interested.
  7. I don't mind these sort of beaten-down stories if I trust the management based on their prior track record, and I really like the business model, and think they've got strong tailwinds both as an industry and as a business within that industry, but I'm not sure that those conditions exist here.

Of course, 2 days later (on Friday 10th July, 2020) - they released this announcement:  Fluence Achieves Positive Quarterly Cashflow.  And rose +17.5%.

I think a number of my points do however remain valid.  On the other hand, this could be a positive inflection point for FLC.  Time will tell.

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#Industry/competitors
Added 2 months ago

Fluence operates in the small to mid range of water treatment, desalination project size.... They work globally from a minesite in Chili, a chicken factory in Italy, a resort in the Philipines, the worlds longest highway in China....and on and on.

This market is saturated with huge multinationals that are chemical companies like ECOLAB, Solenis, filtration companies such as Pentair, some Chinese giants.

On the small cap space I also own Scidev Ltd (ASX:SDV) which imports chemicals that coagulate all the crap in the water that you can then filter out with standard processes.... SDV have a big market in coal mines and recently building sites.

None are as compelling as Fluence, which is weird as I am down on FLC and up on SDV even though I'm more bullish on FLC, as their product offering is diverse, scalable, environmentally friendly, energy efficient, and are fast approaching cashflow positive.

Some countries import water to survive...eg Turkmenistan imports 97% of its use!!!  Ok that is an extreme example..  Zimbabwe imports 39%.  Not only poor countries.. Switzerland imported 24% of its use  ****All these stats are in 2017****   

By reusing wastewater, having decentralised desalination plants in an energy efficient, environmentaly friendly, cost effective solution I believe and hope that Fluence and the communities it serves can prosper.

 

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#ASX Announcements
Added 7 days ago
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#Quarterly Reports
Last edited 4 weeks ago

28-Apr-2020:  Fluence Q1 2020 Business Update and Presentation  and  Appendix 4C - quarterly

Fluence achieves positive EBITDA in Q1; and expects to be cash flow positive in Q2 
 
Quarterly Activities Report for Quarter Ended 31 March 2020 (Q1 2020) 

  • Positive EBITDA (unaudited) achieved in Q1 2020
  • Q1 2020 revenue of US$47.3 million
  • Q1 2020 gross bookings of US$12.5 million, with total contract backlog at 31 March 2020 of US$228.0 million, including US$147.0 million related to the Ivory Coast Project
  • Net operating cash outflow of approximately US$7.9 million, US$2.1 million higher than previously expected due to COVID-19 delays in cash collections on some projects
  • Continued reduction in overhead costs on track; already reduced SG&A (Selling, General and Administrative Expenses) by more than 10% in Q1 2020 compared to Q1 2019
  • Cash balance of US$16.9 million as at 31 March 2020
  • FY2020 guidance reaffirmed, with Smart Products Solutions revenue of at least US$32.0 million, recurring revenue of US$9.0 million and sustained EBITDA profitability in 2020
  • Based on current contracts, and the anticipated collections from the Ivory Coast Project providing remaining conditions precedent are met, the Company expects to be cash flow positive in Q2 2020. 

--- click on link above for more ---

[Disclosure:  I have held FLC shares in the past, but do not currently hold any.  I'm interested again however - it sounds like they may be at an inflection point - moving into being a profitable company at last]

Update:  I looked into them a little further and soon lost that interest.  As explained in my forum post today (8-July-2020).
 

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#Quarterly Reports
Added 6 days ago
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#Personal Opinion
Added 4 months ago

FLC has a suite of decentralised  waste water treatment and desalination technologies and is slowly winning global recognition.

FLC has successfully cracked the difficult Chinese market. The company also has significant projects in the Ivory Coast and Argentina. 

The US is also looking at improving wastewater management and clean water technologies with legislative change.

I believe the snowball is tettering at the top of the hill and FLC may have identified managable solutions for global decentralised clean water technology.

Thus far FLC technology is proving to be reliable, effective and inexpensive to maintain!

Do your own research but the demand is coming! Can FLC successfully fill this demand and become profitable? Time will tell!

My money says yes, but please do your own due diligence!

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#Positive Cashflow Achieved
Added 4 weeks ago

10-July-2020:  Fluence Achieves Positive Quarterly Cashflow

11-July-2020:  FLC were up +17.5% yesterday on this announcement - to close at 23.5 cps; Of course that rise was off their year low of 20 cps, set on Wednesday and maintained on Thursday, and at 23.5c, they are still down -60% from the 60 cps level they reached almost 12 months ago, on July 16th, 2019, and they did also manage to briefly go over $1 back in October 2016.  Not sure if they were in the same business (or were the same company) back in 2008, but Commsec has them as trading at over $200/share, which I imagine is allowing for a major share consolidation or two at some point (where prior share prices have to be adjusted up to reflect the lower number of shares on issue as a result of a consolidation).  It may also involve a backdoor listing or something.  I haven't followed FLC for more than a couple of years.  Anyway, point is that I was pretty negative about them in a forum post here a few days ago, and now (of course) they've popped on this positive news.  Very welcome news for you @Sunkendrailor, assuming that you've kept the shares you bought 3 days ago.  Here's some of the detail:

Fluence Achieves Positive Quarterly Cashflow

Fluence Corporation Limited (ASX: FLC) is pleased to announce that it has achieved positive operating cashflow for the quarter ended June 30 (Q2 2020) in line with previous guidance. The Company’s cash balance at the end of Q2 2020 was approximately US$20.0 million, up from US$16.9 million at the end of the first quarter.

Commenting on Fluence’s financial performance, Managing Director & CEO Henry Charrabé said: “Streamlining our operations and focusing on timely collections from customers enabled us to turn our operating cashflow positive. Despite global challenges and the economic slowdown, the Company is now in a stronger cash position with approximately US$20.0 million cash on hand at the end of June, than compared to US$16.9 million at the end of March.”

Further detail regarding the Company’s financial and operating performance will be provided in the forthcoming Q2 2020 business update at the end of this month.

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So this could be the inflection point that the market has been waiting for (for probably too long), but I still reckon a number of my negative points remain valid, which I'm going to put into a Bear Case straw now.  

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