On March 26, 2015, SmallCapPower wrote about a Canadian company, IWG Technologies Inc. (TSXV: IWG), which manufactures potable water systems for business jets, a bacteria-free plumbing system of sort all contained within the aircraft (read the original commentary here). Since that time, the Company’s share price has risen 42%, to its current price of $0.345, and IWG has continued to grow both its revenue and earnings.
IWG’s subsidiary, International Water-Guard Industries Inc., has been making and selling these types of water treatment devices for 20 years and controls about 85% of the corporate jet market, according to the Company. In November 2014, IWG announced that its water treatment device was selected by Gulfstream for the G500 and G600, the company’s newest large cabin, long range business jets. In fact, IWG says its relationship with Gulfstream Aerospace has been on-going for more than 20 years.
As well, according to the General Aviation Manufacturers Association (GAMA) forecast, the medium to large, long-range business aircraft market, which IWG sells the majority of its products, will continue to be the fastest-growing sectors of the new aircraft marketplace. Business jet deliveries rose by 4.5% in 2014 and over the long-term, GAMA estimates 3% annual growth in the number of total business jets.
IWG has also introduced new products that could help drive its growth going forward, including the next generation of on-demand water heaters for aircraft showers and VIP galleys. The Company believes its Tank-less Water Heater, which is lighter and smaller, would be ideal for future versions of the Boeing 787 Dream-liner and the Airbus 350.
IWG recently announced a 71% increase in net income and 29% growth in revenue for fiscal 2015. With those results, the Company has achieved a five-year compound annual growth of 17% for revenue and 41% for net income.
A stronger U.S. dollar also helped IWG increase its revenue in 2015. About 80% of its sales come from outside Canada, primarily in the United States.
A risk for this company is that in 2014, sales to three customers represented approximately 80% of its total sales revenue. IWG is also aware of one competitor that has recently introduced a water treatment device for commercial aircraft but it believes it will continue to be the dominant industry player given its first to market advantage in addition to the good working relationships developed with its existing clients over many years.
The Company has extensive industry experience at both the Board and management levels as its Chairman Bruce Gowan is the former Chief Financial Officer at Magellan Aerospace and its President Darryl Jacobs was the founder and former President of FLYHT Inc.
Finally, IWG has managed to grow without excessive equity dilution as it currently has just 39.2 million shares outstanding.
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