Dominating a niche market within the business jet industry is Canada-based IWG Technologies Inc. (TSXV: IWG). The company has been operating profitably for 10 consecutive quarters and its revenue has increased an average of 17% per year during the last four years.
Commercial air travel leaves a lot to be desired. Crowded cabins, flight delays, and unruly passengers is driving demand for private jets not only from corporations but also celebrities and other wealthy individuals. These 8 to 18 person airplanes have become more and more like motor homes, many with showers and fully-operational kitchens. All of which requires the use of potable water systems, a bacteria-free plumbing system of sort all contained within the aircraft.
Dominating this niche market within the business jet industry is Canada-based IWG Technologies Inc. (TSXV: IWG). 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 has been operating profitably for 10 consecutive quarters and its revenue has increased an average of 17% per year during the last four years. The company is targeting yearly growth of 10% to 15%. IWG has also reduced its long-term debt from $313,000 in 2012 to just $26,000 in 2014 while increasing its cash position from $924,000 to about $1.5 million during the same time period. In 2014, the company’s revenue rose 12% to a record $7.4 million this while earning a profit of $0.02 a share.
A stronger U.S. dollar also helped IWG increase its first-quarter 2015 revenue, a quarter that has been historically weak, to $1.99 million from $1.48 million and should continue to benefit the company throughout the year. 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 38.5 million shares outstanding. At its present share price of $0.24, IWG has a market capitalization of a little less than C$10 million.
