I logged in to the AGM feeling pretty crap despite the $4.8M win in Brazil that had just dropped in about an hour earlier. I must admit that the share price did have an impact on my mood and had started having some doubts on the management's creditability. However, I stepped out after the hour and feeling a lot more confident of the direction we are heading.
@frostieshake and
@Tragore had given some excellent summary of some of the points. I may only try to give a bit more here.
1. The new director for Municipal Water and Wastewater Steve Scheidler who is with us for about 4 months now has built up the sales team for municipal in particular in North America and also the production team in North America. That will take over the Israeli production capacity, whereas the RO capacity will move to South America.
2. The vision of FLC is to be as a Global company on multiple geographies and with more product mix. The diversification mitigates risk that might impact on a region or a product range.
3. Definition of "pipeline" as Tom puts it: "
Projects we are working on but had not quoted or negotiated for orders. The project will become order somewhere, sometime and likely in the next 3 months to 3 years." ... "These are projects that has names and places we are actually working on." "Whereas backlog means actual orders."I guess pipeline here is well defined and it is
not the billions of dollars in blue sky market opportunities sprouted by most startups and pre-revenue hopefuls.
4. As Frostie had mentioned, on slide 11, we are projecting $40M in new order bookings in H1 2024 and a lot is to be booked in this quarter, and is on track. Pipeline excluding BOO is about $700M with an average deal of $1.9M (350 projects). From the slide, BOO pipeline is about $349M on top of the $700M.
5. Slide 12: Meaningful projects: Tom mentioned the $4.8M Brazil win and there are "
more like that coming".
This is where he mentioned about China. We do know China had experienced a slow down in the past few years, and our projects in Mainland China had come to a halt. However, I think Tom is hinting that we are seeing green shoots. Here is what he said:
"
Finally, although China is still giving us concern, we added another MABR system to another highway system that we've been working on, and the highway rest area in China ... we had added in a new Province. I believe this is either our 3rd ot 4th province, the order is important because starting in the province, (they) would typically buy more projects."
6. More from Tom: "
We live in regulations and get higher market potential because of regulations, but we also have to live with bureaucracies of those regulations, and that takes time to get those projects signed, sealed and delivered."
Tom is hoping to present another similar significant win project sheet to us like in Slide 12 with projects and dollars on, and those are waiting to get the signatures on. They are all waiting for some sort of permit.
Here is the bit that got me excited: "
I did just received words just before this meeting that we had a couple of our (stalled?) projects in our biogas systems in North America that are waiting for (...) permit, both received permit this week. So those 2 projects are set loose and moved forward."
7. Ben: "
As we grow revenue , at a higher margin as we are seeing at the top right (Slide 14), that will lead to very strong EBITDA growth very quickly and a strong EBITDA margin. Ultimately to the point, in the medium term, we expect that to be greater than 10%, but in the longer term, we believe this business can be a 15%+ business."
8. Our strategies as mentioned by Tom is to pick market that are growing; North America is
growing and
well funded.
"
The industries have no choice, they have to spend the money. We have an opportunity on a market that can grow faster than the entire water market in general."
9. There was a question of PE of a typical water company. Ben's answer was that Total EV/EBITDA is the main valuation matrix. As companies start to show double digit growth, in the margin of 35-40%, and 10-15% or double digit EBITDA margins, The transactions (ie M&A) valuation of successful companies is low to mid teens EV/EBITDA. Doug chipped in to say that he last companies he was involved in, he sold at more than 15X EBITDA.
This I believe can be verified in this article I found here:
https://www.bdapartners.com/wp-content/uploads/2023/07/BDA-Partners-Turning-on-the-tap-for-water-investment.pdf10. Lastly, on JBS. JBS had engaged FLC to do a pilot plant in Canada. It is done and tested. "
We are now waiting for a following up meeting with an executive team (from JBS)". "
Project is still alive and developing, expect to be formalized by end of this year."
(20min delay)