Consolidated Water slides on downbeat Barron’s article
Shares of Consolidated Water Co. (Nasdaq: CWCO) are tumbling today after Barron’s reported over the weekend that shares of the water company could plunge by as much as half if it cannot resolve a disagreement with one of its biggest customers.
According to Barrons, the Cayman Islands-based small cap is in a dispute with the British Virgin Islands’ government over payments for water from a desalinization plant. The British Virgin Islands, who has been in discussions with Consolidated Water for the past 10 years to purchase the plant, which removes salts from sea water, claims it, not Consolidated, owns the plant, according to the publication.
The Virgin Islands is the only customer for a desalinization plant that could account for up to a quarter of the company's current earnings, Barron’s says.
Barron’s says problems such as the Virgin Islands dispute could cut Consolidated's 2008 earnings by roughly one-third below the $1 per share now forecast by Wall Street analysts and shares could forfeit their premium valuation, causing the stock to plummet by as much as half. The stock currently trades at 30 times its expected earnings of $0.80 for the current year.
In the mean time, the company continues to record revenues and earnings from the British Virgin Islands, despite the fact that local authorities have been withholding payments for a year.
Shares of Consolidated Water (CWCO) skidded 23.6%, or $7.62, to $24.73 at 11:55 a.m. ET. Shares of Consolidated Water have been trading in the range of $23.29 to $37.49 for the past 52 weeks.
