"The first spirals and the first MABR module (comprising 2 spirals) from the plant have been produced. The Company intends to ramp production capacity in the coming months to meet growing market demand in China. The planned capacity of the first production line is 7,500 MABR modules annually, which corresponds to approximately US$75 million (A$100 million) in potential annual sales."
Each one big roll in the first picture is a module. CMABR is superseded by Aspirals and the M3 has 3 modules in a container, S1 has 1, L5 has 5.
On what I think if SPS sales can be sustained or increased. There was a bit of leap of faith initially during the 2016-2018 period, till iTest started the ball rolling with the first bulk order. The literature on decentralization of fresh water and wastewater treatment got more noticeable, starting from China as they have that urgent need and directive from the top, and the important part is they have the money to pay us.
While I believe the odds of succeeding within these 2 years are good, it is still a bet. The sellers are probably betting on SPS sales can't be sustained, or it will take much longer, or FLC is going to run out of money soon or MABR will not take off or the sellers just need immediate money or any combinations of these; and the rest of us are just feeling stuck, hopeful, praying and keep believing, or just waiting to see the price reaches a level where the threshold of pain to let go is low enough to get rid of the dog...
As for Water as a Service, this is what I remember from Richard's recent webinar. Wastewater treatment in the island resorts (Caribbean resorts) is very expensive, something like $3.50 per ton (I need help to recap here). Desalinated water is very expansive too, but the resorts needed irrigation and are currently using expensive desal water. The RaaS (Reuse as a Service) team are now pushing out business proposals to the resort owners, to do a take or pay deal with us, we provide them with high quality clean reuse water for irrigation which saves them money from using desal, save money on inefficient wastewater treatment. All these for a fixed periodic fee. On our part, we are able to source financial partners to finance the building works with minimum outlay from us as the deals generate an IRR in the mid 20%. And for us, we will receive a revenue from the customers with a gross margin of 50%. We already have one working model at the Hilton in Bimini Bahamas. Back to your accounting scrutiny, these assets will be shown in the "Concession arrangement assets" category. Notice the drop of about $12m for 2020? Yes, that is mainly SQ.
As for ROIC, I appreciate you sharing your method, and it is a logical performance measurement.
As the return is still in "a leap of faith" mode, it can go any direction. When we are able to establish a trend for pipelines, backlogs and a steady combination of sectorial revenue, I think the projections can then be more meaningful.
Invested Capital is also a complicated one for me here. Would that be before or after impairment? Before the merger, RWL cost Ron about $160m, what is now valuable to us is nirobox, IC project and about another $20m+ backlog on CES. Do we include those? I think there was another $60m invested on the EMC side to take it to where it is today. Capital + Lease Obligation + Debt is a good current accounting value, but I pained to think of all the accumulated losses we have incurred, those are sunk cost, yes, should I dwell on them? Maybe no. I will stick to your Invested Capital measurement.
Whiskey break and back to my corner.
FLC Price at posting:
18.5¢ Sentiment: Buy Disclosure: Held
(20min delay)