Sept. 24, 2007 -- This year, Stanford Group's International Water Conference drew the largest crowd yet and featured 18 prominent U.S. and international water companies, industry experts and up-and-coming private companies, bringing to light a broad array of investment opportunities in the sector and highlighting some of the best growth opportunities of the future. For several of the international companies, it was the first time presenting to a U.S. investor audience.
Key take-aways from the conference include:
• Advancements in industrial water treatment including water reuse technologies, ultrapure treatment enhancements, and facility redesign can decrease water consumption dramatically and provide some of the greatest growth opportunities in industrial water treatment.
• Global infrastructure repair and maintenance requirements are staggering and while the trend of underinvestment will prevail, disastrous infrastructure failures will continue to build awareness and could slowly help to drive infrastructure investment.
• Improving regulatory environments, from California to Brazil to China, will continue to benefit the regulated utilities and other companies in the space.
• The landscape of the U.S. water utilities will shift dramatically with the upcoming American Water IPO. We anticipate the IPO will raise the profile of the utilities group and will launch water on to a broader range of investors' radar screens. We believe that overall the IPO will benefit the group, though we could see slight pressure on valuation multiples.
• Companies in niche areas within the sector or in high-demand geographic regions such as China, India and Brazil offer some of the most appealing investment opportunities.
• We remain bullish on Tetra Tech (TTEK, Buy, $24), Nalco (NLC, NC) and three water utilities, Aqua America (WTR, Buy, $24), California Water Service Group (CWT, Buy, $42) and American States Water (AWR, Buy, $42), though the stocks have run in recent weeks. Watts Water (WTS, Buy, $40) and Pentair (PNR, Hold, $39) are attractive at current levels though the overhang of raw materials pricing and the weak residential market leave us moderately cautious on the two.
• On the international front, attractive opportunities include BioteQ Environmental (BQE CN, NC), IVRCL Infrastructure (IVRC IN), COPASA (CSMG3 BZ, NC), Manila Water (MWC PM, NC) and Sinomem (SINO SP, NC). We also like BEFESA (BMA SM, NC) and Christ Water (CWT AV, NC), though liquidity is a challenge with BEFESA and Christ Water is perennially expensive.
To access the rest of the bulletin, click here.
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