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Stocks in the clean technology space have performed impressively in 2019 and continue to do well in 2020. The demand for clean water has been on the rise, both for industrial players and for developing economies including India and China. The growing demand has profited several cleantech companies.
NSW, Australia-headquartered SciDev Limited is one such company that has seen phenomenal growth in the last 12 months. The Company witnessed an exponential increase of 1102 per cent in the stock price during the year 2019, with $0.052 being the stock price at the start of the year (09 January 2019) and $0.625 at the end of the year (31 December 2019).
The remarkable growth in the stock price of the company was led by its skyrocketing financial results, approvals for product trials, and acquisition of new clients, among others. The outstanding financial performance coupled with significant business development initiatives have caught the eye of investors and has brought the stock under the spotlight.
Let’s deep dive to understand the Company’s standpoint and its future strategy to attract investors.
SciDev Limited (ASX:SDV) is engaged in offering chemical solutions and technology for solids-liquid separation. The Company uses its technology to cater to a wide range of industries including mineral processing, water treatment, tailings, construction, oil & gas and dairy industry.
Following are some of the major updates of SciDev:
Trial purchase order with Syncrude:
On 03 March 2020, SciDev announced that it had accepted a trial purchase order with Canada-based oil sands company, Syncrude. The trial order will generate a revenue of ~$1 million for SciDev. The trial is planned to happen late in FY2020 and is likely to last for nearly two weeks.
- Under the terms of the agreement, SDV’s staff would be on-site on Syncrude location in Canada. The focus would be on the deployment of SDV’s chemistries in Syncrude’s Tailings Centrifuge Plant worth C$1.9 billion.
Acquisition of Highland Fluid Technology Inc.
As a strategic move, SciDev Limited announced on 02 March 2020 that it has completed the acquisition of US-based oil & gas company, Highland Fluid Technology Inc. The two parties had signed a binding agreement for the deal on 02 January 2020. The transaction provides SciDev with an array of chemicals, customer focussed team and professional services to the oil and gas sector.
- The integration of chemistry and technology aims to augment fluid economics, water recovery and extraction performance.
- As an outcome of this deal, new chemical orders were placed by the combined businesses of both the parties. The orders were placed with Nuoer Group (SDV’s supply partner in China) and suppliers from North America.
Rationale of this deal:
- SDV would have access to the US onshore oil and gas market worth of USD 2.5 billion via existing customer base of Highland.
- By utilising the existing supply chain of SciDev, the ability of Highland’s current business margins would enhance.
The total consideration under the binding Heads of Agreement as follows:
- Initial Consideration of US$5 million through the issue of 11.9 million SDV shares at a notional price of $0.6 per share.
- Milestone Consideration of US$1 million payable to the Highland provided the company meets pre-defined revenue target in CY2020
SciDev released its 1H and 2Q FY2020 results for the period ended 31 December 2019 on 27 February 2020. During the six months, the Company delivered impressive results and also entered several deals that were vital for business development.
Key highlights from 1H FY2020:
- Revenue grew by 382 per cent on pcp, from $1.3 million to $6.12 million.
- Net tangible assets per ordinary security were 5.61 cents as compared to 3.22 cents in pcp.
- Net loss was decreased by 69 per cent compared to pcp, from - $623k to -$191k.
- Net cash from operations stood at -$2.5 million, compared to -$0.7 million reported in 1H FY19.
- Cash receipts were recorded at $3.8 million, up from $1.2 million, with payables of $3.38 million and receivables of $3.66 million.
While assessing the Company’s sales quarterly starting from Q1 FY2019 (as shown in the figure below), SciDev has maintained a track record of growing revenues.
Second-quarter result for FY 2020: SciDev delivered robust results for the three months ending 31 December 2019 with a 77 per cent rise in revenue over the first quarter FY 2020. The snippets of the performance in the second quarter are mentioned below:
- Sales to customers were $4.04 million
- Cash receipts from customers were $2.26 million, an increase of 47 per cent over 1Q FY2020.
- At the end of the quarter, net cash was $3.07 million, and inventory at hand was recorded at $2.32 million.
- Net cash from operations was noted at -$1.8 million.
Outlook
The Company aims to drive revenue in all the four sectors, namely oil & gas, mineral processing, wastewater and construction, by building a very well-structured business development pipeline. SciDev’s intends to:
- Leverage and strengthen the relationship SDV holds with its strategic partner in China, Nuoer. SciDev finds the scope of R&D and joint marketing in the key areas.
- Drive opportunities for business development within US oil & gas sector by focusing on the outcome from Highland acquisition.
- Actively execute on the Iluka contracts and the existing customer trials in South America’s copper sector.
Key Business Highlights During the six months ended 31 December 2019
Maxiflox® Trail at Las Bambas Copper Mine:
- On 14 January 2020, the Company received a trial purchase order with a diversified mining company, MMG Limited. This allowed SDV to conduct the commercial trial for its MaxiFlox® chemistries at the Las Bambas mine, Peru.
- Lewis Utting, MD and CEO of SDV, mentioned that this was the first entry of the Company into South America’s copper sector.
Acquisition of ProSol:
- On 28 November 2019, SciDev completed the acquisition of ProSol Australia. From this acquisition, SDV expects to gather new customers and opens new sales channels into the NSW Hunter region for the remaining year and in the future.
- The total consideration of the deal was $1.9 million with cash equity split of 55 per cent:45 per cent in three tranches.
- The first tranche of the consideration was floated with 684,000 fully paid ordinary shares at an issue price of $0.50 per share, subjected to 24-month trading lock / voluntary escrow.
SciDev Signed Sales Contract Agreement with Iluka:
- On 11 September 2019, SciDev Limited and Iluka signed a 3-year agreement under which SDV got an initial purchase order for the first fill of its MaxiFlox® chemistry at Jacinth-Ambrosia operation of Iluka.
- The Company aims to generate a revenue of more than $1 million from this order.
Stock Performance: The SDV stock was trading at $0.675 on 05 March 2020 (at 03:09 PM AEDT), an increase of 0.746 per cent compared to the previous day’s close. The stock has generated impressive returns of 139.29 per cent and 998.36 per cent in the last six months and last 12 months, respectively.
