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Consolidated Water executives cash in with share sale

| 27/05/2016 | 0 Comments

CNS Business(CNS Business): With its share price closing in on five year highs, two executives at Consolidated Water have cashed in some significant shareholdings in the wake of the water company’s first quarter results. Stock watchers, meanwhile, await news on the firm’s Mexican subsidiary’s proposal for a desalination plant in Rosarito Beach, Baja California, which, if successful, could add $2 million to annual revenue, analysts said.

According to filings with the Securities and Exchange Commission, Chief Operating Officer John Tonner sold 4,600 shares on May 17 at US$14.00 per share, netting a total return of $63.440.98, while Vice President of Cayman Operations Gregory McTaggart sold 4,721 shares at $14.15 per share, which would have brought in $66,802.15.

Tonner said that as an officer of the company, his trading in CWCO stock is restricted to narrow windows as per SEC Regulations.

“I exercised some options during the current window as they would have expired and been worthless before the next window. This trading activity was driven purely by the date restrictions related to the options and does not reflect my opinion of CWCO shares in any way,” he said.

McTaggart said he was not able to comment on the matter.

From a price perspective, Consolidated Water shares, which are traded on NASDAQ, have been a good investment this year for anyone holding them. The stock traded as high as $16.83 in October 2013, but over 2015 held a lower range between $9.72 and $13.37, before powering ahead in 2016, reaching $14.53 on 6 May, just ten days or so before the sales by the executives.

Gerry Sweeny, a research analyst who follows the company for investment firm Roth Capital Partners, said there could have been a myriad of different reasons for the recent share sales by the executives, which didn’t raise any red flags to him, adding that in his view the outlook for the company was bright.

“You can’t say it’s a good or bad time for them to sell because everyone has their own requirements, but it’s a great company with a great franchise,” he said.

“I am more optimistic on Consolidated Water’s prospects that I have been in the past,” he added, noting that the news was expected on the Rosarito Beach plant, within the next few weeks, with the bidding process down to them and one other firm.

Sweeny said without knowing all the details of the bids, a simple back of the envelope calculation could see $2 million added in revenue each year if it is successful. “Even if they lose they have some land and environmental permits which they could monetise,” he said.

Sweeny said he has a $15 share price target on the company, which does not take into account the expansion in Mexico, which is one of the firm’s most exciting growth opportunities.

Sweeny was also positive on the renegotiation of the retail licence to supply water to Grand Cayman. The company updated investors during its recent Q1 earnings conference call to say that its Cayman retail licence has been extended to June 30 of this year to facilitate ongoing negotiations for a new licence. Currently the firm is waiting to receive the fully executed licence amendment from the government, but said ongoing negotiations were productive and cordial.

First quarter results for 2016 for Consolidated Water showed net income attributable to stockholders up to $2,054,641, or $0.14 per diluted share, compared to $1,921,261, or $0.13 per diluted share, for Q1 last year. Retail revenue dropped over that period as lower energy costs reduced the energy component of the retail rate charged to customers in Cayman.

Tonner, who is also an Executive Vice President of the company, has been working in the desalination and water treatment industry since 1985. He joined Consolidated Water in 2011, having previously been President at Water Consultants International and worked for Cayman Water from 1986 to 1990, where he was responsible for its first seawater reverse osmosis plant.

McTaggart, who joined the company in 1991 as resident engineer, assumed his current position in 1994, having previously worked at CUC. His brother, Frederick, is the company’s President and CEO.

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