LIQT stock did a doji pop on August 26, 2019, on a $8.4 million order. LiqTech announced its largest single order to date for its ceramic silicon carbide water filtration systems for marine scrubber applications. The order was placed by one of the world’s three largest shipping companies and follows the recent installation and system deployment by this same customer on the two largest container ships in the world. The new orders are expected to be delivered starting in late 2019, with completion in 2020.
LiqTech International also announced on August 26, 2019, that revenue for the third quarter is expected to be approximately $10M, representing another quarter of sequential record revenue growth. The company is anticipating further sequential revenue growth in the fourth quarter. The company’s margin optimization program, which delivered a 500 bps scrubber system margin improvement in the second quarter, should generate further improvement in the third quarter. Key drivers to this margin increase include design improvements for more efficient manufacturing and greater operating efficiencies. The company is targeting its overall gross margin to exceed 30% in the first half of 2020. Bookings during the third quarter for marine applications remain strong, evidenced by the recent $8.4M order. As clarification to the company’s recent earnings release on August 14, the company defines marine book-to-bill as new marine orders received during the quarter for future delivery, compared to reported marine revenue for the quarter. The planned expansion in manufacturing operations remains on track and, as previously reported, is expected to triple the company’s current manufacturing capacity by July 2020. The manufacturing expansion will meet the current and anticipated demand for the marine scrubber market, as well as provide capacity for new products and applications the company is currently developing. The recently announced planned acquisition of BS Plastics A/S is on track to close during the third quarter. This small acquisition will be funded with cash on hand. Based on industry data, the company currently maintains a significant market share for closed loop marine scrubber filtration installations or planned installations. New regulatory mandates in China, Singapore and other countries that ban in port open loop scrubbers is driving additional demand for closed loop scrubbers. By the end of 2019, industry forecasters estimate approximately 4,000 open loop installations or planned installations for new ship builds and retrofits of which LiqTech believes that many of these open loop scrubber installations will likely need future conversion to closed loop systems.
This video explains what LiqTech does:
On August 20, 2019, LiqTech International announced the signing of a Share Purchase Agreement (SPA) to acquire BS Plastic A/S, a specialized plastics manufacturer based in Denmark. The acquisition allows LiqTech to in-source certain components of its proprietary and market-leading ceramic silicon carbide water filtration systems for closed loop marine scrubber applications. The acquisition is expected to close in the third quarter of 2019.
BS Plastic was founded in 1958 as a provider of machined and welded plastic parts and is currently a supplier of plastic components to LiqTech. Recently, BS Plastic has focused on parts for the prepress, UV and aquaculture market segments.
Sune Mathiesen, CEO of LiqTech International, commented, “We are excited to advance one of the key components of our margin optimization program — the in-sourcing of certain core manufacturing activities. Upon closing of the acquisition, LiqTech will immediately in-source the manufacturing of plastic tanks and machined plastic products for its water filtration systems. We expect the payback to shareholders to be relatively short on this investment, based on cost savings and profit from BS Plastic’s existing operations. We are excited to integrate the BS Plastic team into the LiqTech Group and look forward to further leveraging their capabilities in the years to come.”
On the daily chart, LIQT stock popped but then profit takers sold creating a bearish doji candlestick:
A break through the $7.20 level on good momentum will likely see a Fibonacci retest of the 50% retracement level at the $8.09 area. We need to see if sustained buying comes into LIQT stock over the coming days.
Institutional investors have increased their long positions in LIQT stock by 55% over the previous 3-month period.
I’m not adding LIQT stock to the long-term buy and hold GST portfolio at this time. The doji pop on August 26, 2019, tells me that a lot of traders have been hurt by the recent plunge from $10 a share all the way down to $5.44. Whenever a stock drops -50%, that means there’s a lot of anger and pain and thus selling on any pop as we saw on August 26, 2019, with the doji candlestick. However, a short-term swing trade may set up in this stock, especially if we get a Supertrend buy signal over the next few days.
Disclosure: We do not hold any position in LIQT stock.