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BQE Water: analysts focus on recurring revenue

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BQE Water TSXV:BQE reported Q1 results this week that included a more than doubling of operational services revenue. Technical services revenue was soft on the quarter however, leading to a miss on analyst expectations on proportional revenue and margins.

BQE Water is a service provider for the mining industry for the most part, specialising in water treatment and management for metals mining, smelting and refining. The company is helping to transform the way the industry thinks about water in the context of natural resource projects by offering services and expertise which enables more sustainable water management practices and improved overall project performance at reduced risks.

The company invests in innovation and has developed unique intellectual property through the commercialisation of several new technologies at mine sites around the world for organisations including Glencore LON:GLEN, Jiangxi Copper, Freeport-McMoRan NYSE:FCX and the US EPA.

Atrium Research in Canada said it was maintaining a buy rating on the stock with a target of CAD 71 per share. Gross margin came in at 44%, with marginal negative margins in adjusted EBITDA on the back of a miss in technical services revenue.

BQE Water, which has a market cap of approx CAD 77m, has seen its stock rise over 121% over the past year. It is currently trading at a PE ratio of 29x. Shares have jumped off a range of around CAD 28-29 to trade at CAD 61 at time of writing.

BQE’s China JV is highly levered to the copper price as it sells recovered metals with every 10-cent increase in the copper price resulting in ~$0.5M in additional annual JV income; copper is up 85 cents since Atrium began covering BQE Water.

BQE Water: bullish future outlook

“We remain bullish on the future outlook for the mining industry in general and BQE’s products specifically,” said Atrium’s Nicholas Cortellucci in his research note on the company.

BQE management has said a winter shutdown of its Northern Canada operations and lower water volumes in China have led to weaker financial performance. There is however a newly commissioned plant in the US to pay attention to, which offers the prospect of recurring revenues in North America, less likely to be impacted by tough Canadian weather.


Atrium said it was focused on the recurring revenue story at BQE. This represented 13% of proportional revenue in 2020 and has grown to 36% in 2023. The company is also benefitting from strong tailwinds thanks to increasingly strict government regulations for water discharge.

“Growing such revenue streams remains a strategic priority for us as we expand recurring revenues through additional plant operations over time,” explained David Kratochvil, President and CEO of BQE Water. “While our technical services for Q1 2024 decreased when compared to Q1 2023, we expect it to catch up to 2023 levels over the remainder of the year.”

EBITDA margins have been steadily on the rise too. Margin levels were negative at the company a decade ago and were reported at 20% last year. Atrium also said it liked the asset-light business model BQE offers. “We expect this to continue scaling up,” the research firm said.

BQE has a clean balance sheet with a large cash position and no interest-bearing debt. It has not raised equity since 2018. Three private investors hold 46% of the stock.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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