SAM Sustainable Asset Management
The global water market continues to experience above-average growth rates, with the overall size of the global water market estimated at U.S. $480 billion for this year and an expected annual growth rate of 6.2 percent over the next five years. Companies that offer innovative products and solutions along the entire water value chain will profit from this trend, creating attractive investment opportunities for investors with long-term horizons.
Water consumption has noticeably augmented over the past few decades. In the mid-20th century, annual global water consumption stood at 1,480 billion cubic meters. By 2000, this figure had already risen to 3,840 billion cubic meters, and the past two years saw an increase to 4,500 billion cubic meters.
SAM expects this trend to continue. Assuming no countermeasures are taken, SAM’s analyses indicate that water consumption will reach about 6,500 billion cubic meters by 2030, resulting in a significant supply shortage.
Heike M. Doerr
Janney Capital Markets
American States Water (AWR) shares trade at roughly 16 times our 2011 estimate, below some mid-cap water utility peers, such as Aqua America (WTR) (18 times) and in line with the company’s closest peer in our view, California Water Service Group (CWT) (also 16 times).
Boasting a 3 percent dividend yield and a strong growth outlook into 2011, we believe AWR shares continue to offer investors a compelling long-term total return opportunity on a risk-adjusted basis. Our $45 fair value estimate reflects a multiple of 20 times our 2011 estimate. We maintain our Buy rating for shares of AWR.
Brean Murray Carret & Co.