B.Riley has reiterated a Buy rating on shares of Cadiz Inc (NASDAQ: NASDAQ:CDZI) with a price target of $15.00.
The firm highlighted the company's potential for a significant positive shift in the coming months if it successfully establishes a master limited partnership (MLP).
The strategic move aims to leverage the benefits of a public/private partnership while maintaining the liquidity of a public company, ultimately supporting the Cadiz Project.
The Cadiz Project, which is expected to cost around $800 million, involves the development of groundwater banking and includes the construction of the Southern Pipeline. This initiative is seen as environmentally friendly and aims to provide equitable access to clean water for disadvantaged communities in Southern California.
The project also seeks to connect the state's water infrastructure from north to south, introducing new capacity and flexibility to the system.
The analyst noted that nearly a month after a business update on September 19, Cadiz Inc's CEO Susan Kennedy reported substantial progress in discussions with various public entities about the formation of an MLP. This move is anticipated to finance the capital costs for the groundwater banking project.
In other recent news, Cadiz recently appointed Cathryn Rivera as its new Chief Operating Officer, marking the beginning of a significant phase of operational expansion. Rivera, who brings 25 years of experience in senior management, is expected to drive the execution of Cadiz's groundbreaking groundwater banking project and scale the deployment of water treatment technologies.
In addition to the appointment of a new COO, Cadiz has secured near full capacity deals for its Northern Pipeline, with purchase commitments for 85% of the pipeline's capacity. This includes a recent agreement with Cucamonga Valley Water District to supply 5,000 acre-feet of water annually, expected to generate approximately $170 million of net revenue over 40 years. Cadiz's subsidiary, ATEC Water Systems, also secured three contracts worth $1.5 million for their iron and manganese filtration systems.
Furthermore, Cadiz entered into agreements with Solstra Communities California LLC and Golden State Water Company. Cadiz will supply Solstra with 1,275 acre-feet of water annually, supporting the development of over 4,000 homes, while Golden State Water Company will receive water for the City of Barstow.
InvestingPro Insights
Adding to B.Riley's optimistic outlook on Cadiz Inc (NASDAQ:CDZI), recent data from InvestingPro provides additional context to the company's financial position and market performance. Despite the ambitious Cadiz Project and its potential for long-term cash flows, InvestingPro Tips indicate that CDZI is currently not profitable over the last twelve months and suffers from weak gross profit margins. This aligns with the company's focus on a large-scale, capital-intensive project that may take time to generate returns.
However, there are positive indicators as well. InvestingPro data shows that CDZI's revenue grew by 27.18% in the last twelve months as of Q2 2024, suggesting some traction in its operations. Additionally, an InvestingPro Tip notes that analysts anticipate sales growth in the current year, which could be linked to the progress of the Cadiz Project and potential partnerships.
It's worth noting that CDZI's market cap stands at $203.69 million, with the stock trading at a high Price / Book multiple of 7.39. This valuation may reflect investor optimism about the company's future prospects, including the potential establishment of the master limited partnership mentioned in the article.
For investors considering CDZI, InvestingPro offers 10 additional tips to provide a more comprehensive analysis of the company's financial health and market position.
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