Floated on AIM in 2005 at 129p, Israel-headquartered Amiad, a profitable producer and supplier of water filters and filtration systems for the industrial, municipal and irrigation markets, is benefiting from the pressing need for clean water in an increasingly populous world. Having invested in its sales and marketing effort, the cash-rich company is growing fast on a global scale across many product categories, yet remains modestly priced considering prospects.

Amiad, founded back in 1962, has a lengthy history of helping to meet the need for clean water through the development of a range of super-efficient, automatically self-cleaning filters and manual filters. Able to run continuously, these energy-saving filters have low maintenance requirements and low operating costs and are used across an increasing array of sectors and industries.

‘Worldwide regulation and pressure for clean water, in both the developed and developing world, are helping us,’ says CEO Rami Treger, adding that growing global investment in water filtration and treatment systems, driven by tightening environmental and public health standards, is driving demand for the group’s products.

Amiad is also benefiting from a ramp-up of investment in irrigation products, driven by the high oil price environment as well as growing climate change awareness, which in the US is encouraging the use of bio-fuels and in developing nations is driving investment in flood prevention initiatives.

Results for the half to June proved nothing short of spectacular, with pre-tax profits gushing 47 per cent higher to US$5.4 million (£2.93 million) as Amiad reaped the benefits of recent investment in sales and marketing. Turnover flowed 44 per cent north to $39.5 million, almost double the $22 million achieved at the interim stage in 2006, while gross margins were stable at
49 per cent.

Amiad, finishing the period with cash balances of $6.5 million (£3.5 million), up from $4.1 million at the December year-end, was able to increase the interim dividend from 3 US cents to 3.5 cents per share.

‘Our growth was across all territories and product lines,’ enthused Treger, pointing to strong orders across Europe, Australia and North America, as well as significant growth in East Asia – one successful project in the region entails the conversion of sewage water into drinking water – and positive progress with projects in Russia, Kazakhstan, the Ukraine and China’s industrial sector.

In the US, new orders won included those for ‘micro-fibre’ automatic self-cleaning filters with a major soft drinks producer, as well as projects for brine water filtration. Further first-half highlights included a breakthrough project secured in India, for screen-filters in the petrochemical and power industries, as well as the winning of a major irrigation project for water supply in Central Africa.

Significantly, this was a period in which projects were won in new territories, such as Chile, for screen filters used in the mining sector, and in the Philippines, for a project using micro-fibre technology for use in the municipal drinking water sector.

Already demonstrating its ability to deliver significant organic growth, cash-rich Amiad is in a good position to add new technologies or territories through acquisition. Indeed,
it recently acquired a controlling stake in a profitable Turkish company for $1.4 million in
a move adding a complementary product line and manufacturing capabilities.

Moving into the second half-year with a growing order book, the company expects to report ‘significant’ growth for the full year. Earnings estimates for 2008 from house broker Panmure Gordon have been upgraded accordingly from 14.7p to the equivalent of 17.7p, ahead of 20.5p for 2009, placing the shares on a prospective price-to-earnings multiple of 12.6, falling to only 10.9 next year. With Amiad offering growth in markets with compelling fundamentals, the business looks undervalued.

Amiad Filtration Systems	AIM	£34.4m	176.50p	0.00p
Click here for interactive charting
Other company articles:
Amiad – profits  filtering through			06/10/2008
Amiad Filtration Systems			15/09/2008
Amiad Filtration Systems			31/08/2007
Buoyant markets boost Northbridge			26/03/2007
RC triples earnings			31/03/2006