Media update, page-1896

Water related stocks are hard to invest in by and large. I have invested in 3 on previous occasions spanning 25 years of investment. They were profitable but it took 3 to 5 years before it became profitable. The pure water plays were profitable because they were very well politically connected. They had serious backers. One was eventually bought out by Citic and became Citic Envirotech. The other was Moya Asia backed by Anthony Salim, Indonesia's riches man. The one that didn't too well was actually the most impressive EPC/BOT (Boustead Salcon) to me it just couldn't compete internationally in the large segment of the market against the GE and the Suez's. But the investment was profitable because it was part of a conglomerate and other divisions made money for the Group (Boustead Singapore).

I am not excusing FLC's management by any means. I suspect they listed in Australia was because the HK and Singapore Exchanges are full of water-related plays and the ASX was new to this space. Hence, it was natural for players here to get excited and now become disappointed.

Traditional water related stocks especially BOT/EPC players are capital hungry. The gestation period is especially long because they need to do feasibility studies. If they are awarded the contract, they have to design, line up financing, build, operate (that's a big risk because if they get the off take agreement water wrongly, they will end up in trouble.) Also, don't under estimate the importance to raise finance, or RaaS as FLC calls it. If they financed it with debt like Hyflux, the debt may overwhelm the company eventually. FYI, Hyflux, is now seeking protection from debtors.

So, what's my point. It is a tough sector to invest in. I am not going to espouse FLC because I have written enough about it in the past. But if you are a newbie and considering investing in water related stocks, I think there are other better opportunities elsewhere.