SciDev Limited [ASX: SDV]
Environmental Services & Equipment
An innovative and high-growth wastewater solutions play
SciDev Limited (SDV) is an ASX-listed provider of wastewater treatment technology and related chemical services. SDV offers innovative technologies and services to a range of end industries seeking to capitalise on the total addressable market (TAM) of US$17bn. With the ongoing increase in environmental regulations and a focus on increased operational output for clients, SDV is set to leverage its extensive business development pipeline in water-intensive industries. In addition, its strategy of bolt-on acquisitions will support its operational and financial growth.
Innovation in water treatment methodologies is its USP
SDV has been continually investing in R&D, looking for innovation within waste-water treatment methodologies. Despite the fact that reverse osmosis is a widely used technology, the typical water recovery rate is 70-90% (with an enormous volume of rejected brine being generated). SDV has developed an alternative approach and achieved PFAS removal results as low as 0.0002µg/L. This provides the company with a unique proposition and puts it considerably ahead of the competition. Consequently, based on continuous success and growing reputation, SDV is fast establishing a strong client base of blue-chip clients across all verticals.
Stringent global environmental regulations to support growth
The strict environmental regulations that are increasingly being enforced and/or monitored by various regulatory entities are exerting pressure on industries to reduce their carbon footprint. Water and wastewater treatment services cost Australia c.US$6bn per year. Direct capital expenditures and equipment maintenance account for 20% of the total spending. The European Chemicals Agency (ECHA) released a proposal to prohibit the whole family of PFAS chemicals by 2026-2027. This makes Europe, North America (energy and mining industry) and Australia the most attractive markets for SDV. We believe stringent global environmental regulations, new business development and cross-selling efforts position SDV comfortably to continue delivering operational and financial growth in the next few years
Valuation range of A$0.59–0.73 per share
Using a blended valuation approach, equally weighted between DCF and EV/Revenue, we have valued SDV at A$0.59 per share in the base-case scenario and A$0.73 per share in the bull-case scenario. Given that SDV has been winning contracts and has a track record of effective project execution, we anticipate the momentum in contract wins will continue to rise, potentially resulting in solid revenue growth (CAGR 2023- 28: 26%). The key risks include regulatory, uptake and competition.