Mid-Week Update: Scarcity Is Coming, Who’s Got the Water?


As we checked in with what was going on in the water news worldwide, we saw the following headlines: “India Confronts Unprecedented Water Crisis” and “Steps Underway For Drinking Water Supply to Chennai”.

An analysis of the water levels in reservoirs across India showed that 85 out of the 91 observed were below 40% of capacity and 65 below 20% capacity. Chennai even has some desalination plants along the sea coast, but not enough to keep up with the scarcity.

We mentioned on Monday that the future seems bleak for water supply keeping up with the population growth and rapid urban sprawl. Although none of our company’s for our Alpha contest are in India, AquaVenture is active in this problem in the Caribbean, Latin America and Middle East.

These areas have the same issues. Plenty of sea water, but desalination plants that can’t seem to keep up. We’re not claiming to have the solution to the global water crisis, but there is plenty of evidence that its heading in quicker than everyone expects.

Let’s look at the financials of our three water utilities for the week…

First up, we’ve got Middlesex Water Company (MSEX). Middlesex Water Company has been providing water and wastewater related services to parts of New Jersey, Pennsylvania and Delaware since 1897.

The company announced its first quarter financial results at the beginning of May. Net income for the first quarter of 2019 increase $2.1 million when compared to the same quarter of the previous year. Operations and maintenance expenses decreased by $1.7 million when compared to the first quarter of 2018.

Those are two things that investors love to hear – there is more money coming in and less money going out. The combination helped earnings per share increase by 45%. It also contributes to the long-term dividend plan. Middlesex Water Company has paid cash dividends continually since 1912 and increased that dividend for the forty-sixth consecutive year in 2018.

We briefly mentioned the company’s plans to renew the current infrastructure in our article on Monday. Earlier this month, Middlesex Water Company announced that is will be investing $10 million to modernize drinking water infrastructure in sections of New Jersey.

You editor lived in Baltimore City for a period of time when mater main breaks seemed to be a weekly occurrence. The cause was simple, outdated infrastructure that no one wanted to replace until it was broken. This proactive maintenance of 4 miles of water mains, service lines, valves and fire hydrants will save time and money in the long run. It’s an investment now to conserve spilt water and emergency repairs later.

Shares opened on Monday at $62.03 and closed yesterday at $59.32. That’s a loss of 4.3% over the first two days of our Alpha contest.

Next up, we’ve got AquaVenture Holdings Limited (WAAS). AquaVenture has a dual strategy in the water realm. It’s Seven Seas division offers water utility solutions in the Caribbean, Latin America and the Middle East. It’s Quench division deals with bottleless filtered water coolers and other products that use filtered water as input.

The company also announced its first quarter earnings at the beginning of May. Revenues increased 43.2% when compared to the first quarter of the previous year. Broken down by segment, that was 48.8% in Quench and 36.4% in Seven Seas Water.

Quench is seeing gross margins of 49.1% and Seven Seas is seeing gross margins of 56.3%. The company also reiterated that it has completed 15 acquisitions since 2016. The company is on target to hit its 2019 mid-point estimations. If it does, the company will have seen Adjusted EBITDA double in just 3 years.

Shares opened on Monday at $19.79 and closed yesterday at $19.63. That’s a loss of 0.8% over the first 48 hours of the trading week.

Finally, we’ve got Global Water Resources Inc. (GWRS). Global Water Resources owns and operates water and wastewater utilities in metropolitan Arizona.

The company announced its first quarter results at the beginning of May. Global Water saw its revenues increase 4.4% and its net income increase 102.8% when compared to the first quarter of the previous year. The company also saw the total active connection increase 11.7% over the 1-year period ending March 31.

The company did see operating expenses increase when comparing the first quarter to the previous year. However, this increase was primarily due to expenses associated with two acquisitions. Meaning it’s due to the company investing to make more money in the future.

The management explained that the remainder of 2019 will be used to improving and automating utilities and expanding its service area. More investment to keep the water running smoothly and continue revenues down the line.

Shares opened on Monday at $10.61 and closed yesterday at $10.50 That’s a loss of 1% over the first two trading days of our contest.

That makes our mid-week leader AquaVenture Holdings with its loss of only 0.8%. We mentioned on Monday that AquaVenture has an Alpha contest win to uphold. Right now its barely in the lead, so we will have to check in on Friday to see if it keeps it’s crown.

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