Clean Teq Water Ltd has attracted a valuation upgrade of $1.83 from Pitt Street Research based on revised FY22E sales forecasts.
Pitt Street had re-run its relative valuation model for the company, generating $1.83 per share base case and $2.37 per share bull case (previous: $1.65ps – $2.18ps).
In addition, analysts have revised the sales forecast for FY22E to $8.6 million base case and $10.6 million bull case (previous: $7.4 million – $9.5 million) retaining target sales multiples at 7.9x – 8.7x.
The company recently won two key contracts totalling $4.6 million that are expected to bring upside potential to future cash flows.
The following is an extract from the research update:
Continues to win contracts
CNQ won two new contracts in 1Q FY22: 1) installation of a $3 million HIROX plant for National Energy Services Reunited Corp (NASDAQ:NESR), an oilfield services provider in the Middle East and North Africa region, and 2) installation of a $1.6 million EVAPX system at a processing facility in Australia.
We are encouraged by the signing of the HIROX project as it marks the first application of CNQ’s HIROX technology in the Middle East. Once the plant is set up and running, we expect it to help NESR to achieve high water recovery. In turn, we believe this will result in NESR actively promoting HIROX to prospective customers in the Middle East region, which we expect to drive more contract wins in the near/medium term.
On the EVAPX project, we think it underscores the increasing significance of EVAPX’s zero liquid discharge (ZLD) solution. Importantly, EVAPX is also energy efficient as the system can be powered and operated by waste heat energy and as such, results in a lower carbon footprint vs. conventional solutions. Given the push for sustainability and stricter environmental and discharge regulations, we anticipate more companies to transition towards ZLD. This should drive the higher deployment of technologies like EVAPX in the coming years.
Valuation upgraded to $1.83 per share
As CNQ grows and continues to prove up the technologies, we think the nexus between pilots and large-scale projects will likely weaken, meaning lesser customers will require field pilots/testing. This could shorten CNQ’s sales cycle, which we expect to bring upside potential to its future cashflows.
Valuation upgraded to $1.83 per share Based on our revised FY22e sales forecasts, we have re-run our relative valuation model, generating $1.83ps base case and $2.37ps bull case (previous: $1.65ps – 2.18ps). We have retained our target sales multiples for FY22e at 7.9x – 8.7x.