Updates on TRIT

Third Quarter 2009 Earnings Highlights

• Revenue for Q3 2009 increased 131% to $4.9 million from $2.1 million in Q3 2008.
• Gross profit (exclusive of depreciation and amortization) increased 112% to $1.9 million for Q3 2009 from $0.9 million in Q3 2008.
• Q3 2009 gross margins decreased slightly at 39.1%, vs. 42.6% for Q3 2008.
• Income from operations increased 150% to $1.3 million from $536,000 in Q3 2008.
• Net income increased 112% to $1.1 million from $506,000 in Q3 2008.
• Diluted earnings per share increased to $0.27, from $0.14 in Q3 2008.
• Weighted average number of diluted shares outstanding was 3.95 million as of September 30, 2009, compared to 3.56 million as of September 30, 2008.
• Completed an initial public offering of 1,700,000 ordinary shares at a price of $6.75 per share, traded on NASDAQ Capital Market on September 10, 2009.

New Contracts:

• Awarded $960,000 in Mountain Torrent Forecasting contracts covering eight projects in four provinces.
• Awarded $1.6 million Municipal Sewage Treatment contract in Kuancheng County of Hebei Province.
• Awarded $1M Phase One Contract for Wastewater Treatment Plant in Jinjing Newtown in Baodi District of Tianjin Municipality in Northern China.

You may find related articles in
http://cocacolabuffet.blogspot.com/2009/10/no-drought-for-trit.html
http://cocacolabuffet.blogspot.com/search/label/Green%20Technology

Disclaimer: This blog is for general information purpose only. Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.

Disclosure: The blog author owns TRIT in her personal account as of November 18,2009

DGW-China Water Play

As risk aversion among investors subsides, growth stocks may be in fashion. Duoyuan Global Water Inc. (DGW) could be one of the niche plays amidst increased government spending and regulations on the standard of water in China.

The company reported a earnings result that epitomizes a growth company for the third quarter 2009

• Revenue increased 30.9% to RMB255.2 million ($37.4 million) from RMB195.0 million in the prior year period.
• Gross margin increased to 49.5% from 46.8% in the prior year period.
• Operating income increased 31.1% to RMB95.7 million ($14.0 million) from RMB73.0 million in the prior year period.
• Net income increased 23.1% to RMB73.4 million ($10.8 million) from RMB59.6 million in the comparable period of 2008.
• Diluted earnings per ADS was $0.49. Each ADS represents two of the Company's ordinary shares.

While all three segments of the business grew fast , the wastewater segment outpaced circulating water treatment and water purification.

• Revenue from wastewater treatment equipment increased 42.3%, to RMB100.1 million ($14.7 million) in the third quarter of 2009 compared to RMB70.3 million in the third quarter of 2008, due to increased demand for Duoyuan's belt filter press machines, sludge screw, online testing equipment, ultraviolet shelving disinfection systems and microporous aerators.
• Revenue from circulating water treatment increased by 20.0% to RMB96.1 million ($14.1 million) in the third quarter of 2009 compared to RMB80.1 million in the third quarter of 2008, driven by increased demand for the Company's new fully automatic filters, electronic water conditioners and circulating water central processors.
• Revenue from water purification equipment increased by 28.4% to RMB55.0 million ($8.1 million) in the third quarter of 2009 compared to RMB42.8 million in the prior year period, as the Company's newly introduced models for central water purifiers, industry pure water equipment and ultraviolet water purifiers continued to be well-received by the marketplace.

While the growth is good, Chinese water market is a highly fragmented one. DGW carries only about 1% of the market share, facing large rivals such as Zhejiang Omex Environmental Engineering, is a subsidiary of Dow Chemical, General Electric and Ashland that are also players in the Chinese market.

As a strategic plan, I would expect the company to acquire smaller companies to consolidate long-term growth. The company has cash and bank deposits of RMB937.2 million ($137.3 million), compared to RMB198.5 million as of December 31, 2008, mostly reflecting net proceeds from the Company's initial public offering.

Until the company gains reasonably larger market share, I would view this as a tactical speculative play that works well in a market that is less risk averse rather than a long-term growth value play.

You may also be interested in the following articles:
http://cocacolabuffet.blogspot.com/2009/10/tap-into-chinese-water.html
http://cocacolabuffet.blogspot.com/2009/10/no-drought-for-trit.html


Disclaimer: This blog is for general information purpose only. Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.



Disclosure: The blog author does not have positions of DGW as of November 9, 2009

No Drought for TRIT

China's Spending on Water

As previously discussed in this blog's "Tap into Chinese Water", spending on water resource and wastewater management in China is expected to soar in the next few years.

According to the budget plan announced by Ministry of Water Resources, China expects to invest $11.7 billion in 2009 in water.resources sectors. China’s central government has allocated $3.8 billion in the first half of 2009. With the projects the central government has approved, this investment will increase to $45 billion in the aggregate over the next 3 years. The projects include mitigation of 6,240 unsafe small and middle-sized reservoirs due to lack of proper maintenance for several years.South-North Water Transfer Project is a large, inter-basin, long-distance water transfer project that is charged with dozens of major urban water supply tasks for such cities as Beijing, Tianjin and Shijiazhuang.

TRIT Can Ride the Wave

Tri-Tech Holdings, Inc (TRIT) is a small Chinese company that specializes in water resource, wastewater and tail gas management. In the first half of 2009, about half of the revenues came from water resource management and the other half from wastewater and tail gas management.

TRIT definitely falls into the categories of "high-growth" companies. Q2 '09 revenue was up 54% to $3.1M from $2.0 M in Q2 '08. Q2 '09 net income $865K or $0.24 per diluted share up 100% from $444K or $0.12 per diluted share. For the six months ended June 30, 2009, revenue stood at $6.0M, up 75% from $3.4M a year ago. Net income $1.5M or $0.41 per diluted share up 78% from $807K or $0.23 per diluted share.

Assuming a range of 2009 earnings per share (EPS) between $0.65 to $0.82, at yesterday's closing price of $18.25, the stock has a price-to-earnings ratio (PE) of about 22 to 28. This is comparable or slightly higher than its Chinese counterpart, DGW, another Chinese water management company that too has just made its initial public offerings.

The valuation is fair on the assumption that the company can succeed in its pursuit of government projects in the next few years. The company is currently pursuing 100 river basin flood monitoring and forecasting systems in more than 100 counties with a market potential of $72.5M. Additional projects are being pursued through distributors and partnerships with a potential value of $43.5M. The company is pursuing wastewater treatment business in several markets including Tianjin Binhai where the government plans to construct over 40 large pumping stations and 30 sewage treatment plants with a total market potential of $8.7B. Hebei Province plans to construct 50 sewage and grey water reuse treatment plants in the next two years. Sales are expected from early flash flood warning system projects in Hubei and Tsinghai provinces. Increased sales also are anticipated in a long distance water transfer project with dozens of urban water supply tasks for major cities including Beijing, Tianjin and Shijiazhuang where the company is already engaged.

Risks
Noteworthy is that the company may face political risks in China where regulatory and central and local budget allocation procedure can be very complex and tricky. Small companies like TRIT may not have enough political connections to be granted big projects. In fact, should there be delays in budget allocation or receivables collection  which is not unusual in emerging markets, the company can face problems in its working capital.


Note:
1. As both companies are recent IPOs, the number of shares outstanding reported in http://www.google.com/finance is different from the one used in calculations of their most recent SEC filings.

Disclaimer: Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.


Disclosure: The blog author owns TRIT in her personal account as of October 13,2009

You may also be interested in articles in the same category:
http://cocacolabuffet.blogspot.com/search/label/Green

 

Tap into Chinese Water

Water infrastructure in China is facing major challenges.

"China faces widedspread water scarcity, frequent floods in the south and east and droughts in the north and west. The country also suffers serious water pollution which heavily strains the environment. China's water supply is smaller than the United States but is home to approximately five times as many people. It is estimated that 300 million Chinese citizens have no daily access to clean water.....Over 700 million Chinese citizens drink water that does not meet current World Health Organization standards. Water usage in China has quintupled since 1949, and almost 90% of underground water in Chinese cities is affected by pollution........................................................In short, China is struggling to procure clean and provide enough potable water for a growing population....."

Not surprising, China is scaling up the spending on clean water projects

"Through 2010, China’s environmental investment is expected to be approximately $184.2B. Approximately $39.5B is expected to be used for water resource management, urban water management, wastewater treatment, sewage reuse and water treatment. Between 2007 and 2009, the Chinese allotted approximately $526M in special funds to establish a National Water Resources Management System.

In November 2008, the Chinese government announced a $585B stimulus package in response to the global economic crisis. This included approximately $3.3B for environmental projects."

To tap into this long term growth, let's have a snapshot of a few companies that work on waste water and water technologies: TRIT, DGW, VE, DHR. [Click to enlarge the diagram]

Disclaimer: Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.

Disclosure: The blog author does not own any positions of the above mentioned stocks in her personal account as of October 8,2009