The broker has just started coverage of the desalination and fresh water technology specialist and while it says it is hard to put a value on the company as revenues are currently limited, its initial estimate is 77p per share based on possible future cashflows.
Modern’s membrane platform technology could play a material role in delivering fresh water across a range of applications including desalination, evaporative cooling systems and enhanced oil recovery, it said, as it had already demonstrated impressive potential cost savings.
Looking at the scale of Modern Water's target markets, Numis estimates that total global spending on new desalination plant construction is currently around US$10bn pa, and could rise to US$15bn pa by 2020.
Global desalination plant operating costs are at least $50bn annually, believes the broker.
With a very large range of possible targets, Modern Water has chosen to focus in particular on the Middle East and China.
The key for the company is to commercialise its membrane technology, says Numis, which has tentatively forecast revenues of £5.4 mln in 2013 and £9.2 mln in 2014.
But the broker believes Modern’s management would be disappointed if it can't significantly outperform the forecasts.
Numis has a ‘buy’ rating on the shares, which today were 55.25p.