Fluence Corporation Ltd specializes in providing decentralized and pre- engineered water, wastewater treatment, and reuse solutions for both municipal and industrial applications operating on a global scale with an established business presence in North America, South America, the Middle East, Europe and Asia. Fluence is the exclusive developer and owner of a unique wastewater treatment system based on a membrane aerated biofilm reactor technology (MABR). The company was formed in 2017 following the predominantly scrip-based merger of Australian listed Emefcy Ltd and US group RWL Water. Fluence subsequently raised an additional ~$60m in private and institutional placements and share purchase plans, with the last raise, in October 2019, at $0.44/share to raise A$38.3m. In Q4 2020 FLC clarified its strategy setting the business focus on selling MABR wastewater treatment in China and SE Asia and NIROBOX desalination solutions in the Middle East and SE Asia. Fluence is moving to become a provider of “Smart Product Solutions” for water treatment with the transition supported by profit and cash flow from a US$190M project in Ivory Coast.
Business model
Fluence supplies a range of technology solutions for decentralised water and wastewater to water authorities and corporates across the globe. The company has several proprietary pre- engineered, standardised Smart Products Solutions (SPS) including AspiralTM, NIROBOXTM and SUBRE. Fluence’s strategy is to become a global leader in decentralised Smart Product Solutions, generating recurring revenues from operations and maintenance and Build Own Operate (BOO) solutions. The company has focused on small footprint (containerised) packaged solutions which can be aggregated to deliver larger scale solutions for decentralised water treatment, desalination, retrofitting of waste treatment and remote siting of water filtration processing and re-use. A current major project in Ivory Coast is due for completion in 2023 and will provide profit and cash flow to support the company’s new direction.
Cost Efficiencies and Revenue Growth
FLC has delivered on the new strategic direction in 2021 with revenue up strongly in Q1 and Q2 and solid sales with 34 MABR plants sold in the first half of the year. A large MABR plant was commissioned in Sihanoukville in Cambodia to treat wastewater for 60,000 people. The Ivory Coast wastewater project was cash positive through progress payments received and is on track for completion by Q1 2023. The company reiterated guidance of US$35-$50m sales of SPS products and positive underlying EBITDA for FY2021.
Trading at a significant discount to peers
We view Aeris Environmental and Sunrise Energy metals (formerly Clean Teq) as peers to Fluence. The companies are of a similar scale and are delivering environmentally focused technology solutions. Fluence, is trading on 0.7 times EV/Revenue while Aeris is trading on almost 1.5x.
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