Company: Environmental waste international
Listings :TSXV , US OTC
Ticker: $EWS $YEWTF 
Market cap at time of publication: $85 MCD
Stock price at time of publication: 0.34 CAD
Business: Tyre and waste recycling through reverse polymerization
TAM Market size: 158 billion $
Comparable peer : Scandinavian Enviro systems $SES

Analysis of the new Joint Venture parntership

After announcing a new Joint Venture partnership on 22/3 share price of the company has fallen roughly 30 %.
One would think that a new partnership would have affected the share price in a more positive direction.

So why this sudden drastical fall in share price?

My analysis is that the market has seriously misjudged the Joint Venture partnership just announced as if EWS had negotitated from a position of weakness and is selling their test plant for pennies on the dollar. The actual situation as I interpret it could not be further from the truth.

I believe this Joint Venture partnership to be the most significant event in the entire history of EWS. IF you have any sort of sales or technical background you know that in order to be able to sell large amounts of advanced technical systems you need a commercial demonstration facility. EWS have against all odds been able to sign a 100 million dollar contract even before having a commercial facility and also gained a valuable shareholder in their customer Windspace.

Business model and current client situation,

The EWS business model is clearly built around reccuring revenues. Their plan is is of course to make money on each plant sold but the real and long term revenue is from a never ending royalty streams from each plant.With 3 additional plants commited by Torreco, the commercial plant being finalized in Sault Ste Marie, Ontario and the Nyborg plant about to be built by Windspace in Denmark EWS as of now has 5 facilities planned.
Ongoing client discussions with other clients in are likely to be announced by the company sooner rather than later judging by the latest management discussion ” EWI is currently working on a number of plant sales with both public and private entities in Canada, Australia, the UK, Nepal, India, Denmark and Italy. The Company is also evaluating a number of potential partners in China.”

Joint venture with Torreco

In the press release you can read between the lines that the price of 7 million CAD is lower than it normally woud have been due to the fact that Torreco is committing to building three additonal plants. If instead EWS had raised the 7 million CAD which is now being invested by their Joint Venture partner Torreco it would first of all have been time consuming and secondly it would have caused a large dilution. I strongly beleive that EWS will have a lot easier time selling and signing more multi million dollar contracts by having a commercial facility in the own backyard built by their own engineers. What can also be read between the lines of the press release in the Joint Venture agreement is that EWS will be able to use the facility as a demonstration point for new prospective customers and clients

The first commercial facility will also be operational a lot sooner than the plant being built by EWS customer Windspace in Nyborg.
My estimate is that EWS by choosing to sell their test plant at a reduced price to Torreco will save between 12-18 months of time and will have the Sault Ste Marie, Ontario commercial facility up and running in between 8-12 months. So instead of having to fly over to Europe for customer demonstrations EWS will now have a working commercial demonstration facility which they will still own 30 % in and get royalty payments withi driving distance of their main office.

Current debt situation of EWI
Thanks to the joint venture Torreco will be consolidating all the debt of the subsidiary Ellsin Environmental Ltd . I expect that this should substantially improve the EWS balance sheet and This will put the company in a very strong financial situation.

ESG conclusion: EWS has a very exciting time ahead and the current pressure on the share price is a good entry point for anyone contemplating of taking a position in the company. I’m also expecting an update from the company shortly about ongoing customer and prospect activities. EWS is a 15 year in the making overnight success (ironically speaking) and has its most exciting growth in the near future.

 I own shares in this company personally and this is not to be considered financial advise, always do your own research!

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