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March 17th, 2022 | 13:28 CET

Memiontec, China Water Affairs Group, Nestlé - Shares around water

  • Technology
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Cold clear water, freshly treated for drinking, is a luxury that is not the order of the day in Asian countries. Therefore, water treatment plants and innovative water filtration systems are vital for the country and its people. A look into three stocks around water supply in Singapore, Indonesia, China, and worldwide helps make smart investment decisions. Because without water, no economy can produce. Without water supplies, supply shortages occur in cities. And when unfiltered drinking water carries pathogens, it kills entire generations. These companies provide water, both in the supply and in the transfer.

time to read: 5 minutes | Author: Juliane Zielonka
ISIN: Memiontec Holdings Limited | SGXE56008290 , CHINA WAT.AFF.GRP NEW | BMG210901242 , NESTLE NAM. SF-_10 | CH0038863350

Table of contents:

    Memiontec - Treating water sustainably

    What would you do if your domestic tap water suddenly came out of the tap brown and putrid? According to the Federal Environment Agency, the quality of drinking water in Germany is very good. 70% of the domestic natural product is obtained from ground and spring water. If pathogens get into the drinking water network, many people can quickly become infected. Therefore, this risk must be kept very low.

    In Asian countries with high population densities, clean water is vital for maintaining infrastructures. The severe water pollution that prevails there renders much of the available water unusable.

    Therefore, companies are needed to treat the water and ensure a regulated water supply. One of these companies is Memiontec. The Hong Kong-based group of companies provides complete solutions for water treatment. Memiontec has over 20 years of experience in water and wastewater management in Singapore, Indonesia and China.

    Its core business provides total solutions with services related to the water supply chain. The range of services extends from engineering, procurement and construction to operation, maintenance and service of water and wastewater treatment plants. It is rounded off by the sale and distribution of modular and customized systems and equipment. Memiontec uses innovative technologies and materials to recycle this vital element.

    Singapore's water demand is currently around 1.9 billion liters, with 45% of the water used by households and the rest by industry. By 2060, Singapore's total water demand will almost double. The government is supporting a dedicated tunnel irrigation system with numerous construction projects.

    The situation in Indonesia is even more dramatic. One in two people there has no access to clean water. Almost 70% of the population has to resort to poisoned water. Water supplies are also virtually non-existent.

    The People's Republic of China already suffers from water shortages in several large cities. The extremely high use of fertilizers and pesticides in agriculture leads to pollutants in the soil and thus also in the groundwater. Therefore, water treatment plants and technological innovations from the Memiontec Group are indispensable and are increasingly in demand.

    Dividends are also provided. CEO Tay Kiat Seng (郑吉成) announced, "Against the backdrop of our improved financial results and in line with our stated dividend policy, we plan to pay a dividend of 0.209 Singapore cents (EUR 0.14) per ordinary share for fiscal 2021. That represents a dividend growth of 13.0% over the dividend of 0.185 Singapore cents (EUR 0.12) per ordinary share for fiscal 2020." Business developments show how vital Memiontec's work is.

    China Water Affairs Group Limited - Share buyback indicates undervaluation

    Over the next five years, the water supply and treatment market will register a percentage CAGR in terms of revenue. The global market size will reach millions of dollars by 2026.

    Shares of companies based in China have a higher investment risk for Western investors than shares outside the People's Republic focusing on Asia. One reason for this is the ADR (American Depository Receipt) structure. You do not buy a share, but a certificate that entitles you to buy a share. For one thing, an ADR is tied to the issuing bank or stock exchange and can become worthless in the event of bankruptcy. For another, the Chinese government intervenes in companies according to its own rules and nationalizes them. Another word for this is expropriation.

    In the utility sector, government arbitrariness seems to be more restrained since an intact water supply for the population is helpful for the Chinese government. The fact that the China Water Affairs Group is doing well economically can be deduced from insider trading. For example, CEO Chuan Liang Duan invested HKD 1.6 million (about EUR 185K) to buy shares at an average price of about HKD 10.38. The reasoning: Buying shares shows that the buyer thinks they are undervalued. The Company records a total of 144 investors.

    According to China Waters' annual report, although the Chinese government has a prerogative to nationalize the waterworks after contracts with companies such as China Water Affairs Group expires, they must be bought out at the market price. With a 28.86% stake, Chuan Liang Duan has at least hedged his bets well.

    Nestlé - E-commerce sales up 15.1%

    Humans are made up of about 70% water. Depending on one's age and the outside temperature, it can go down to 50%. And then fresh water has to be put back into the body. In the market of water transfer services, no investor can ignore the Nestlé share. Nestlé SA is a Swiss multinational food and beverage company headquartered in Vevey, Vaud, Switzerland. As of 2014, it is the largest food company globally by sales and other metrics.

    In the wake of the Putin war, its compatriots in Russia now have to do without essential food products such as Nespresso coffee and San Pellegrino water. The corporation has stopped deliveries, a spokesman tells Reuters. Essential food products are still being delivered to the Russian population.

    Many companies are struggling to operate in Russia because of the imposed sanctions. Governments, consumers and investors are resisting the war of aggression in Ukraine. Shipping also remains suspended, and logistics chains are therefore disrupted. Nestlé has already established new ways of selling.

    The Company increased its e-commerce sales by 15.1%, raising the e-commerce shares of total group sales to 14.3% in 2021. And Corona's pandemic-related structures are also creating the necessary technology boost, as Nestlé continued to expand its networked operations technology last year. More than 100 sites benefit from a more connected workforce, better visibility across the entire production process and local flexibility. In a year that saw supply chain bottlenecks, Nestlé was able to identify changes in demand and supply in real-time and resolve issues much faster. A strong performance for a company of this size.

    Water means life. In the wake of overpopulation, water purification plants and supply systems are becoming increasingly important to sustain the infrastructures of entire countries. So if you want to invest in sustainable growth companies, you should take a closer look at Memiontec shares. Those who want to dare to invest in Chinese companies despite the risks mentioned above should take a closer look at China Water Affairs Group. To invest in sustainable growth companies, the Memiontec share is exciting. Due to its enormous size, the Nestlé share is a stable investment. There should be neither large price jumps nor falls. Nevertheless, analysts warn against an overvaluation of the share.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") currently hold or hold shares or other financial instruments of the aforementioned companies and speculate on their price developments. In this respect, they intend to sell or acquire shares or other financial instruments of the companies (hereinafter each referred to as a "Transaction"). Transactions may thereby influence the respective price of the shares or other financial instruments of the Company.
    In this respect, there is a concrete conflict of interest in the reporting on the companies.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.
    For this reason, there is also a concrete conflict of interest.
    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Juliane Zielonka

    Born in Bielefeld, she studied German, English and psychology. The emergence of the Internet in the early '90s led her from university to training in graphic design and marketing communications. After years of agency work in corporate branding, she switched to publishing and learned her editorial craft at Hubert Burda Media.

    About the author

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