{australien_flagge}Australian industrial wastewater treatment technology company Parkway Corporate (ASX: PWN; FRA: A1JH27) has been rather stingy with corporate news in recent months. That makes the just-released quarterly report for the quarter ended Dec. 31, 2021, all the more important if you want to measure the solid progress the company has been making behind the scenes.
The message is that Parkway is gaining a firmer foothold in its “bread-and-butter” services and wastewater technology business following its two acquisitions last year; expanding its customer list to larger industrial companies, government entities, among others; as well as adding a “leading European membrane technology company” as a new collaboration partner; and also building a new iBC® pilot plant to scale-up one of its core pretreatment technologies. Last but not least, Parkway provided further details on the scale of future opportunities for its core technology portfolio. That’s nothing to grumble about.
What is happening with the core technology portfolio?
Already during the presentation at the annual general meeting in December 2021, MD Bahay Ozcakmak had indicated that he expects to be awarded a contract from a major global company for a feasibility study based on Parkway’s disruptive core technology portfolio. The name of the company is not mentioned, but the quarterly report reveals that Parkway been advised “that the customer has received internal funding approval.” Currently, the parties were working to finalize appropriate procurement and contracting arrangements, it said. That sounds promising, although Parkway must make the caveat that despite the advanced discussions, “there is no certainty.” Nevertheless, one can read between the lines that the project is moving forward. It would be the most advance evaluation of a large-scale application of Parkway’s core technologies.
The underpinning for “uncertain” future prospects is provided firstly by a strong balance sheet with cash reserves of A$4.9 million as of December 31, 2021, and secondly by growing business activities in services and wastewater technology. Group sales increased to approximately A$1 million in the quarter just ended, with cash receipts from customers rising to A$0.87 million. This represents a 175% increase on the previous quarter, with Parkway expecting continued rapid growth in its sales pipeline. Subsequent to the period under review, the company was awarded a contract by a government agency to undertake a preliminary study for another wastewater treatment plant, pointing to a warm reception for Parkway.
Encouraged by the results of testing and positive feedback from the industry, Parkway has finalized the design for an enlarged iBC® pilot plant and plans to begin construction of the new pilot plant in February 2022. The iBC® technology provides pretreatment of wastewater and is therefore complementary to Parkway’s aMES® membrane technology. The new iBC® pilot plant will enable larger scale testing and provide product samples for industry evaluation. Discussions are ongoing with a number of potential customers and partners.
During the period, as mentioned, Parkway entered into a strategic partnership agreement with a leading European membrane technology company. The partnership agreement provides a framework for collaboration that will enable Parkway to design, engineer, construct and install water and wastewater treatment plants based on the artner’s innovative membrane-based technology. The European partner is understood to generally collaborate with much larger companies. In this sense, the partnering decision can be seen as a vote of confidence that the fledgling Parkway Corporate has been awarded representation within key markets in Australia.
Conclusion: Parkway’s share price has been running sideways at A$0.01 for quite some time now. This corresponds to a valuation of about A$20 million. Net of cash, the enterprise value is A$15 million. With 310 million of the A$0.02 options expiring in December 2022, we expect Parkway will continue to march ahead making solid progress during 2022, to ensure the A$6 million from the exercise of options is raised, which should take the company through to free cashflow if everything works out the way the company expects.
We have mentioned elsewhere that recent water technology IPOs in Europe have launched at tens of times the valuation of Parkway, even though none of the companies are yet profitable. The valuation difference with Parkway can probably be explained by the fact that Parkway emerged from a restructuring and was not an IPO – hence the many shares. Parkway likely will only be able to catch up to its European peers in terms of valuation if it is seen primarily as a technology company. That’s why it’s so important that Parkway can successfully demonstrate and market its “next generation” technology. Signs are mounting that a major customer could offer Parkway the opportunity to do so.
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