Thursday, 20 August 2009

Unseen Financial Gem in International Water Guard

International Water-Guard (TSX-V: IWG)
Basic Shares: 39.3 million
Fully Dilluted: 46.5 million


A steady management hand at International Water Guard - and one that moved quickly to trim costs in a deteriorating market - won the admiration of an analyst who set IWG's fair value share price five times higher than its current level.

Analyst Siddharth Rajeev at Fundamental Research pegged the company's fair value share price at $0.30, well above the Aug. 19th share price close of $0.06.

Rajeev said one financial gem that caught his eye in IWG's June 30th, third-quarter results was the Vancouver-based company's strong working capital, worth about $0.05 per share. Yet Mr. Rajeev calculated the market is only giving IWG a company value of $0.01 per share based on IWG's July 29th share-price close.

As a result of that and more, Mr. Rajeev stuck with his recommendation for investors to BUY IWG shares in this his 12th financial update on the company. Mr. Rajeev was writing after IWG's third quarter ended June 30th. Even though Q3 revenues dropped 11% year over year, Mr. Rajeev noted IWG President and CEO David Fox cut operating costs by 9%, instep with the soured aviation market.

The aviation industry around the world suffered several setbacks over the near past. First came sky-high fuel prices. That was followed by the world-wide recession. The third calamity was the swine flu breakout and the extra chill that brought to already cooled air travel. All of which resulted in IWG selling less of its sophisticated water disinfection and water storage technology for aircraft.
But despite all of the above, Mr. Rajeev estimates IWG will finish this difficult fiscal year on Sept. 30th with nearly $1 million in the corporate vault - marking the fourth consecutive year IWG has increased its cash position. Another factor that could bode well for IWG's share price is the improved overall market, Mr. Rajeev noted.

The S&P Aerospace & Defense Industry Index rose 41% since last March. While the analyst wasn't pointing to that index rise to sound the end of this economic downturn, he guardedly offered it could be a leading indicator for a general economic recovery by the end of this year - and thus improved sales prospects for IWG.
Mr. Rajeev also noted that IWG delivered its first water treatment units to Gulfstream, makers of the biggest, fastest - and one of the most expensive - corporate jets in the world, the G650. The sleek new aircraft will have IWG's water technology as standard equipment and according to reliable industry trade publications, the corporate aircraft manufacturer's order book is holding steady at 200 + aircraft. It also helps IWG with its standing in other aviation markets that Gulfstream picked IWG as the 2008 Supplier of the Year award. That's the third consecutive year IWG has been handed that prestigious award.
Adding to the foundational strength of the company is the fact that both Mr. Fox, IWG's President and CEO, and the company's Vice President & General Manager, Gerald Eiers, were buying up company stock last month.

To read all of Mr. Rajeev's updated analyst report, please click here.