PET (ASX) Ann: China Update and new Brazil Project

Originally posted by Georgepiero: ↑

After the SP headed south for quite a few months, I feel like this is more than a temporary pull-back from the SP peaking 6 months ago. It's good to see most posters here are still fairly positive. I was lucky to enter this stock at a relatively low price a few years ago and have been very grateful for what the company has rewarded the long term holders with. And in my view there is little doubt that the company will keep growing but to me it also comes down to how fast they can grow and how the rate of growth aligns with the SP.

The growth from Chinese market has done most of the heavy lifting in the past two years, and like many people in this forum I believe it's only a matter of time before more contracts are announced. However, like Laurence Freedman said in an interview, although Phoslock is a quality product with proven track record, the key to success in China is the relationship/local connection. The over-reliance in China (or should I say a couple of Chinese directors) is certainly a concern that can't be overlooked, but so far it seems that they have managed the relationship very well.

The presence of Phoslock in international market has spread across many years whilst most of the time the sales figures have been underwhelming. To be honest, I am a bit skeptic about the $130m pipeline given what they did last year and the year before. It will require a growth rate that is even higher than what they have achieved in China. I really hope I am wrong, maybe the new CEO and the new product can really make a revolution in the international market.

I am not a naturally optimistic person and always try not to fall in love with the stock when holding it for a few year.

All in my own opinion, to finish if off with the quote from Newing's report.

"The company has a proprietary product which solves a pressing environmental problem affecting many waterbodies, without collateral damage; in other words, has a very wide moat with a potentially trillion dollar market all to itself; is run by a competent board and management; is still owned 25% by said individuals after recent sales; has key Chinese board members, managers and shareholders; has a connection with the largest water
company in China; is financially strong with no debt; has a high gross profit margin and a very high return on equity; could continue to grow strongly for decades to come; has a profile of increasingly recurring revenues; ticks all the boxes as an ethical investment."

Expand

China reliance is going to be an issue until proven otherwise................This in, BOD eyes, could also be viewed as a risk off ploy while the Chinese think of China centric as massive potential. China wants to produce, export and engineer and apply and quite willing to work under the auspices of an Aus company whilst achieving just that.

If demand increases as expected then I want to be a fly on the boardroom wall and see how the Chinese contingency on our Board react/view potential production sites outside of China and how they will navigate around the possibility of not being China centric anymore.

How LF and his relationship with the Chinese stands up when the cards are on the table could be interesting indeed.

We might also all have it OH SO WRONG..........and when this twin relationship we have with China bears fruit both in China and internationally, we have to pay respect and admit that our close Chinese business relationship was a cornerstone in our endeavours. The advantage we have over many other Aus businesses operating out of China is that we have a proprietary product with strong patents.