Canaccord initiates coverage on MyCelX at 'speculative buy'

Analysts at Canaccord Genuity initiated coverage on water treatment systems developer Mycelx Technologies with a 95.0p target price and 'speculative buy' rating on Thursday, pointing to opportunities in PFAS and the importance of the Middle East and North Africa market.

Mycelx develops and commercialises water treatment systems that provide removal of hydrocarbons, the widely-used PFAS family of chemicals, and other difficult contaminants from water and air waste streams, with its core technology component being a patented polymer media solution that uses unique bonding properties to remove contaminants.

"A step-change in traditional water treatment, the media achieves exceptionally high removal efficiency, even for the smallest droplets," said Canaccord.

"This solution is scalable, highly efficient, and commercially proven. Australia is a first mover in defining regulations for the hazardous material, and the US is set to follow by 2023, providing a significant long-term growth opportunity for Mycelx's PFAS expansion."

The Canadian bank highlighted that expansion into new markets was "a key element" of Mycelx's strategy, and said the remediation of PFAS presented "a clear market opportunity".

Canaccord also noted that the Middle East and North African markets had delivered roughly 70% of historic group revenues, with Mycelx supplying downstream solutions in the Middle East and upstream solutions in Nigeria and North America.

"We forecast circa 20% revenue growth for the group in the near term, driven by low-double-digit growth in existing markets and a step-change from new opportunities in PFAS and EOR (enhanced oil recovery). Mycelx delivers high incremental margins and high EBITDA drop-through, thanks to the commercial attractiveness of its solutions. We expect the group to remain cash positive, with first positive operating cash flow expected in 2024E."

Reporting by Iain Gilbert at Sharecast.com