Envirosuite shares spike on second China deal

Here's why the Envirosuite Ltd (ASX: EVS) share price has spiked today and is up over 430% YTD.

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The Envirosuite Ltd (ASX: EVS) share price has opened higher this morning after the company announced a second 'strategic co-operation agreement' with a Chinese company.

EVS shares closed trading yesterday at a price of 31 cents per share but have opened nearly 5% higher this morning and are currently swapping hands for 32 cents at the time of writing.

Envirosuite describes itself as a 'world-leading air quality software platform'. It's been an incredible year for the company's shareholders. EVS shares started 2019 at just 6 cents per share, delivering year-to-date gains of more than 430% on today's share price.

What did Envirosuite announce today?

Envirosuite has announced a five-year partnership (open to extension) with Chinese company Hebei Sailhero Environmental Protection High-tech Co. Ltd (Sailhero), which is a Shenzhen-listed environmental protection company.

Sailhero specialises in air and water quality monitoring equipment and claims to have a 30% share of the overall market in China. A major focus of the company is city-wide monitoring for Chinese government clients.

Under the agreement, Envirosuite will be Sailhero's strategic provider for 'environmental solutions for air quality and other utility projects'. Both companies expect to cooperate on sectors such as ports, mining, agriculture and smart cities. In return, Envirosuite will 'actively promote' Sailhero's grid monitoring equipment and related businesses to its customers.

Sailhero works predominantly in the Hebei province of China, which the company notes is China's eighth-largest province with over 75 million people with an estimated annual economic output of over US$500 million.

Envirosuite CEO Peter White has this to say on the deal:

It is highly significant that within two months of commencing our China focus we have managed to extend our reach into a new province with a major listed company that perfectly complements our offering. Even more significant is that Sailhero, a company that has been a pioneer and the dominant market player in providing air quality monitoring equipment for over two decades, has decided to partner with Envirosuite to help extend their solutions in identification of sources of pollution.

What's next for Envirosuite?

This is certainly good news for Envirosuite. China has well-documented problems with air-quality and the Chinese government has made it clear it considers this to be an environmental policy priority.

Access to such a large market will give Envirosuite the opportunity to significantly scale its operations using this new partnership and entrench its foothold in this lucrative market.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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