Entry Price: $0.64


1. Business model and revenue generation process

  • Emefcy offers a commercially-proven wastewater treatment solution through its state of the art technology which uses 90% less energy than conventional technology
    Emefcy sells globally to municipal and industrial treatment plants in Israel, US Virgin Islands, Ethiopia, China via a water as a service business model

    • The method of treating wastewater produces green electricity as a by-product
  • Growth strategy centred around the expansion into the China market – Chinese government has 5 year plan to increase the number of rural communities with wastewater treatment from 10% to 70%

This business model relies heavily on the IP contained in its technologies. We see that has a strong competitive advantage and were attracted by the sustainable growth potential for this product.

2. Assessment of management

  • Management have strong backgrounds in ventures and cleantech
    • Richard Irving with multiple start-ups over 30 years including 2 NASDAQ IPOs
    • Eytan Levy with background in global wastewater treatment

Management had previously raised over US$2bn on capital created U$7bn of value

3. Financial due diligence and valuation

  • Net cash balance of US$27m to help fund growth strategies in China
  • Revenue of US$0.4m (maiden revenue) in 1H16
  • Enterprise value of c.$100m at time of entry, with US$18m worth of contracts with more China contracts in the pipeline
  • Transaction multiples in the industry indicated values of 10-18x sales (Inge / BASF, NanoH20 / LG Chem)

Entry price was high at first glance, but that’s not accounting for the large addressable market the company operates in. It currently sells into a US$2.5bn market (ex China) with the addition of the Chinese market to add another US$20bn to industry revenue

4. Risk identification

  • Rule of law in China: the enforceability of contracts, and a previously agreed price (such as with Wuxi Municipal Design Institute) is a risk whenever doing business in China. We remain cautious of this
  • Sustainability of IP: very hard to measure this risk given new technologies are being developed everyday that could challenge incumbents. The first mover advantage somewhat, but not completely offsets this risk

5. Assessment of risk versus reward

Management has delivered on the promise of sales in 2016. The growth prospects in China, combined with the transformation technology for the water treatment industry gave us enough confidence to make an investment


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