Darco Water Technologies' (SGX:BLR) Returns On Capital Are Heading Higher

Darco Water Technologies Limited (SGX:BLR), a provider of integrated engineering and expertise-driven solutions for water treatment, wastewater management, clean water supply, and vacuum solid waste management, has been making waves in the water treatment industry. With a well-established presence in China, Malaysia, Singapore, and Vietnam, Darco has a track record of delivering projects on time, on budget, and with high quality. The company's scope of work includes design, fabrication, assembly, installation, and commissioning, as well as Design, Build, Own, Operate (DBOO) projects. Darco's commitment to Environmental, Social, and Governance (ESG) and Corporate Social Responsibility (CSR) initiatives sets it apart from its competitors.

Darco's recent financial performance has been a rollercoaster ride, with revenue growth fluctuating and profits taking a hit in some years. However, the company has shown signs of recovery in 2024, with earnings per share (EPS) of S$0.011 compared to a loss of S$0.058 in the previous year. The company's return on equity (ROE) has also improved to 1.8% in 2024, up from a loss of 17.99% in 2023. These improvements indicate that Darco's strategic initiatives and investments are starting to pay off, contributing to enhanced returns on capital.

One of Darco's key strategic initiatives is the DBOO project in Ba Lai district of Vietnam's Ben Tre Province. This project, a joint venture with InfraCo Asia, involves the construction and operation of a water treatment and clean water supply plant. The plant will initially supply 5,000m3 of clean water per day to up to 20,000 rural households, with the capacity to be increased to 15,000m3 per day upon completion of the second phase in 2024. This project is expected to contribute a regular revenue stream to Darco, supplementing and smoothing the income flow from Engineering, Procurement, Construction (EPC) projects. This will enable the company to use its financial resources more optimally and generate a higher rate of growth.

Darco's commitment to ESG and CSR initiatives is another key factor driving its returns on capital. The company has organized activities to interact with the local community and donated home and school supplies to the needy as a token of appreciation for the warm welcome they have extended to them. These initiatives not only contribute to the company's social responsibility but also help in building a positive image and strengthening relationships with the local community. This, in turn, can lead to more business opportunities and enhanced returns on capital.

In conclusion, Darco Water Technologies Limited (SGX:BLR) is poised for a comeback with its strategic initiatives and investments starting to pay off. The company's DBOO project in Vietnam and its commitment to ESG and CSR initiatives are driving its returns on capital higher. As the company continues to execute its projects and maintain its commitment to ESG and CSR, investors can expect to see a steady improvement in its financial performance.