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Water Intelligence looks very murky

07/02/2019 · Water Intelligence (WATR) 

AIM Small Caps UK

Water springing from a leaking pipe
We struggle to understand how this US centric business has ended up on AIM and there are plenty of red flags to worry shareholders. Plus, the valuation looks totally bonkers.

Water Intelligence (WATR), calls itself “a leading multinational provider of precision, minimally-invasive leak detection and remediation solutions for both potable and non-potable water”. Hardly a catchy title but then leak detection is never going to be glamorous. Its services are conducted through a wholly owned subsidiary American Leak Detection, which was established in 1974 and largely operates through a franchise model.

For the last full year ending December 2017, WATR generated revenue of a mere $17.6m and profit of only $858k. That makes the market capitalisation of £55m look very generous. Even if you throw in all the revenue generated by WATR’s franchisees, ‘overall system sales’ still only hit $90m. Forecasts for 2018 suggest revenue of $24m, however, that big uplift assumes an increase in corporate-owned franchises.

Unnerving acquisitions unsupported by cashflow

Not content with mopping up territories in the US, which should offer more than enough growth to satisfy anyone, WATR is spreading into Europe, Mexico and Australia. Perhaps these big…

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