@stockrockGreat financial analysis as per usual.
I had a look at your numbers, and think that we don't have to quite hit the lofty heights of SPS growth to make it work.
I did this pretty quickly, so my numbers are just educated guesses more than anything, and 2023 + 24 is quite unpredictable as to how SPS and RR will look. I think you have CES a bit low. With Ivory Coast, it looks like it is about a US$196M project at current exchange rates. I think they booked about $36.5M of that for 2020 revenues, leaving $159.5M to be spread out over 21, 22 & 23. I have gone a 59.5, 80, 20 split, but could be variable.
We will have to see how the Ivory Coast O&M tender goes, I have just used your 2023 RR figure for consistency. IC RR contributions could be anything. Peru kicks in late this year for $3M p/a RR contribution for 10 years, then hopefully by 2024 they have made progress on their WaaS plans and they have started selling MABR and more Nirobox units as a water service.
Their future plans still do include 10% CES, so in 2024 at approx $150M in total revenue, they would have to have at least $15M in CES projects. Will be very interesting to see what Richard wants to do with the Italian, South American and Egyptian business units. I like having them there, they do come up with some interesting projects, Italy have consistent food waste wins, are an integral part of the IC project, and have been doing some good things with biogas. South America still has a lot of desalination and lithium opportunities, not to mention could be a growth market for MABR. The Argentinian business especially is a well trusted leader in water, they have a lot of repeat business and links to government projects. Egypt is going to continue running into water scarcity issues (with the Ethopian Dam changing the Nile flows), so desal will continue to be in demand into the future. They may not invest much additional capital into growing them, but I think they can run lean in future and make some meaningful contributions to revenue. If they sell some of those units, the operating costs will come down considerably, but there is also some talent and opportunities that will be lost because of it.
Getting from 2022 to 2023 will be big for transitioning to a heavy SPS mix.
You would hope some of the seeding that has been going on the last 12 months pays dividends with some additional bulk customers.
The current 5 year plans should be starting to take shape at a provincial level in China now, provincial ministries will have to be looking at their WWTP reuse targets and having to plan out some project tenders. We should see the tender wins in the next 12 months then work going into 23 & 24. As trust is building in MABR technology, projects are becoming larger. Instead of seeing more new plants in the 200 m3/d range, over the next few years hopefully we start getting those larger greenfield SUBRE orders at 2000 m3/d to 20,000 m3/d. We need some Chinese partners to take the tech international and push it into other parts of Asia and Africa. Retrofit SUBRE needs to have developed a drop-in version by 22, so that in 23 and 24 we can see some retrofit SUBRE into existing brownfield WWTPs to enhance their nutrient removal. It is of note, that even in predicting SPS revenue for this year, there is such a large range of $35 to $50M. If it were not for COVID, would we already be hitting $50M in SPS orders in 2021?
Need a few Nirobox desal wins around the would too. Water stress worldwide does continue, so there are plenty of opportunities. I haven't predicted much SPS growth between 23 and 24, as I can't see them building a big enough pipeline in the next 3 years to sustain your 2024 additional growth. That may change, depending on the makeup of the partners they are currently on-boarding. What country is going to be the next Cambodia, with large projects won out of the blue? Will the Philippines start to accelerate over the next few years? It feels like international travel restrictions will be tight until 2023 also, will that affect deals getting over the line until 2023 and 24? People have been asking for some US wins for some time. Although small units, there are now 10 sales for US customers. That is progress and can only grow as the US becomes more aware of MABR as a viable wastewater treatment.
I know my numbers above "stagnate" over 22, 23, and 24. But the revenue mix changes moving towards higher margins, so COGS is less. I also don't want to make too many crazy predictions, as even predicting a 100% growth in SPS in 2023 feels a bit silly in some ways. Anything could happen depending on variables such as large Chinese partners making very large orders, (China Rail etc), whether IC O&M is won and what that yearly figure turns out to be, and also how many other large types of Cambodian SUBRE projects start to get accepted in the 5000 to 20,000 m3/d size. We have basically not seen any retrofit SUBRE yet, so in a few years those larger revenue contributions could make a big difference.
Overall after that quarterly, things feel pretty solid financially, and company seems to be establishing itself well in the international market. 281 MABR sales across 11 countries reads pretty well, for something that only started coming off the Chinese production line in Sept/Oct 2017. Been a big 4 years of proving the tech and seeding it around the world.
