We all tend to take our water for granted in Singapore. Most of us do not realise that much of our water supply doesn’t just come from rain (through our catchment reservoirs) and water imports. NEWater plants actually supply up to 40% of our water needs and desalinated water supplies up to 30% of our water needs. This means that water and wastewater management solutions are essential to Singapore’s water security.
As ESG investing gains prominence, water and wastewater management solutions is an area that lends itself naturally to sustainability and environmental concerns. While the winding up of Hyflux (confirmed on 21 July 2021, after 3 years of restructuring attempts) may leave a poor impression on the general public and investors, the industry is more than just a single high-profile company failure.
Listed on the SGX Catalist on 5 March 2020, Memiontec Holdings (SGX: SYM) is a total water solutions company in Asia with more than 20 years of track record serving municipals and MNCs in the area of water solutions across Asia.
Since its listing, the company has secured major contracts with state-owned enterprises to provide water solutions. In 2021 thus far, Memiontec has secured $21.7 million contract from Singapore’s Public Utilities Board (PUB) and 3 contracts in Indonesia (amounting to $5.5 million) from both industrial and municipal sectors. Almost half of the company’s order book is from Indonesia with the remaining mostly from Singapore with some presence in China.
For investors concerned with a repeat of Hyflux, the amount of debt that the company carries may be critical for their investment decision. Memiontec’s gearing for FY2020 stands at 31% (Net debt/Total equity) which will fund the company’s growth and expansion.
For investors interested in water solutions and ESG investing, here are 5 things to know about Memiontec Holdings.
What differentiates Memiontec from your peers in the water treatment industry?
First, Memiontec has built a strong geographical presence across Asia with our subsidiaries in China, Indonesia and headquartered in Singapore. We also hold respective licences such as the BCA Specialist Workheads ME11 Grade L61 in Singapore, and the B1 and B2 construction licences2 in Indonesia.
Second, we see ourselves as a one-stop integrated water technology total solutions provider with a diversified and synergistic business model. We value-add at each component of the water value chain based on customers’ requirements. We have also built up a strong database of proprietary customised management information systems, design know-hows, associated programmable logic control, standard operating procedures to manage and operate water treatment plants, allowing us to generate economies of scale and higher operating margins.
1Highest tier and right to participate in public tenders with unlimited tendering limit.
2Highest tier and right to participate in public and private tenders with unlimited tendering limit.
Describe the Group’s financial performance in the recent years. How do you plan to build growth going forward?
Revenue has more than doubled from S$16.07 million in FY2016 to a record of S$34.61 million in FY2020. The Group has registered profitability for the past 5 years and on an EBITDA basis, it has grown 28.3% to S$1.63 million year-on-year in FY2020.
Indonesia is one of our key growth markets and we have been building up our local team as well as establishing more partnerships and strategic alliances with Indonesian state owned enterprises for more opportunities.
Progress has been encouraging and is evident in our order book, with 50% from Indonesia and the remaining from Singapore. Simultaneously, we are also proactively exploring water-related opportunities in other Southeast Asia markets.
What do you think are some key drivers for the water treatment industry?
Water is an essential part of our lives and is a key building block for industrial activities. According to Euromonitor’s sustainability database, water withdrawals have been increasing by an average of 1% per year since the 1990s and will continue to grow by 30% in 2050. Despite 70% of the earth’s surface being covered by water, only 3% is fresh water and 0.5% accessible.
In Southeast Asia, nearly all countries are water stressed. With increasing urbanisation, higher population growth and more industrial activity, demand for water will continue to rise.
In Singapore, water demand is expected to double by 2060 from today. In the municipal section, water recycling and desalination capacity is expected to supply 85% of future water needs in 2060. Indonesia, being the most populous country in Southeast Asia, sees 1 in 2 lacking access to safe water and over 70% relying on potentially contaminated sources
What are some ways Memiontec is working towards supporting a sustainable economy?
Globally, 80% of wastewater flows back into the ecosystem without being treated or reused, hence ensuring that there are sufficient and safe water supplies for everyone is becoming increasingly challenging and a focus.
For Memiontec, we are a strong believer that water must be carefully managed at every part of the cycle – from freshwater abstraction, use, collection and post-treatment, to the use of treated wastewater and its eventual return to the environment. A key part of our solution is helping customers evaluate and identify the key issues of their water assets and providing the best solutions to maximise the usage of their water assets in a sustainable manner.
We provide consultancy to government agencies in Asia to share insights on innovative and best practices in water treatment solutions in order to enhance their water infrastructure and systems. The Group views this as indirectly contributing towards a sustainable economy and environment for future generations.
Having a “moat” or a competitive advantage is something many investors look for in companies they invest in. Can you share how Memiontec has a strong business advantage?
We see the following as the “moat” of Memiontec:
#1 Proprietary Know-How and Technical Knowledge
- Proprietary customised management information systems and associated programmable logic controllers for the management and operations of water treatment plants
- SOPs and technical manuals for the management and operations of water treatment plants
- Deep industry knowledge that allows the company to understand underlying customers needs from tender specifications to win new projects
- Design know-how to customise the design of water treatment plants to optimise plant operations, as well as the specific plant designs.
#2 Established Partnerships and Networks
- Contractual agreements (joint venture) with Jakpro that provides access to the sole licence to sell treated water in Jakarta, Indonesia.
- Strong strategic networks with government and business networks in Indonesia, where Memiontec has secured various MOUs with State-owned Enterprises to explore new opportunities to sell treated water in other parts of Indonesia.
#3 Regulatory Approvals
- Memiontec is one of 35 companies in Singapore that holds BCS ME11 Grade L6 licence which provides the right to participate in public tenders for Mechanical Engineering works with an unlimited value tender without limitation.
- In Indonesia, the Group’s subsidiaries hold the B1 and B2 construction licences, the highest tier of construction licences in Indonesia, which provide the right to participate in public and private tenders of medium to high technology levels and risk levels
Editor’s Note: Some answers for this article were extracted from the SGX 10 in 10 series published on 28 July 2021 and have been republished with permission. You can read more on the SGX website.