CDT Environmental, a Chinese Sewage Treatment Provider, Seeks $12 Million US Listing

The small-cap company sees big potential for growth in rural China as the nation shifts toward environmental awareness.
Jan. 20, 2022 20:21
CDT Environmental, a Chinese Sewage Treatment Provider, Seeks $12 Million US Listing

(CapitalWatch, Jan. 20, New York) A year after its first attempt, CDT Environmental Technology Investment Holdings Ltd. has renewed efforts toward a small public offering in New York.

Based in Shenzhen, CDT is a sewage treatment company, providing design, development, manufacture, sales, installation, operation and maintenance of sewage and septic tank treatment systems, and related services. As said in the prospectus, the company's "separation technology uses a biochemical process for economically and sufficiently treating rural sewage" and its equipment has a 10-year lifespan.

CDT seeks to sell 3.07 million of its ordinary shares at $4 apiece, targeting $12.3 million in total. It hopes to complete its IPO on the Nasdaq Capital Market under the symbol "CDTG." The underwriter, Westpark Capital, may acquire an additional 15% of the shares upon IPO to cover over-allotments, if any.

In its updated prospectus, dated Jan. 19, CDT Environmental Technology noted that it is not subject to China's cybersecurity review effectuated since its last filing with the U.S. SEC. However, the company will require approval from China's Ministry of Commerce, the State Administration for Market Regulation (SAMR), and the State Administration of Foreign Exchange before it can use the IPO proceeds in China.

For the six months through June 2021, CDT reported $3.5 million in revenue, up 12% year-over-year. Losses from the first half of 2020 turned to $169,321 in income in the half-year period of 2021. In 2020, CDT booked $8.9 million revenue on $1.5 million in losses, according to the prospectus.

CDT said it plans to grow its business through geographical expansion in various provinces, municipal projects, and vertical expansion into "organic fertilizer production using dehydrated solid waste."

The company cited the continued problem of sewage discharge without treatment in most rural areas of China, increased environmental protection laws of recent years, and the increasing awareness of issues in the industry as aspects that will propel the market forward. According to Forward the Economist as of January 2018, the market size of rural sewage treatment in China is forecast to reach $31 billion in 2030.

In its filing, CDT argued that "in most regions, the sewage discharged from septic tanks to municipal sewers does not meet the standards promulgated by the Chinese government" and "the market for our systems to effectively treat the sewage from septic tanks in compliance with such government standards is large and growing."