Two leading global experts have both turned bullish on France's Veolia Environnement (NYSE: VE). Vivian Lewis, in her Global Investing, notes, "Veolia is the way to play the 'water works square' on the monopoly board."

Nicholas Vardy, editor of Global Stock Investor suggests, "The smart money is betting that water may be the 'oil of the 21st century.' And Veolia is my number one way to profit from this global megatrend."

Vivan Lewis says, "We recommend buying French water and sewage conglomerate Veolia at current prices; the stock has been brought down by niggling Euro-concern about its levels of debt. The company is also being penalized for acquisitions.

"Veolia is the former Générale des Eaux, a municipal service firm. This history creates an image problem for VE which is seen as a utility.

"Our main reason for the buy, apart from price, is that this is a fast growing company with good earnings in a hot sector. In 2007, VE had revneues of euros 32.6 bn, up 14% on which its recurring net profit fost 22.5% to euros 933.2 mn. Earnings per share were euros 2.16, up 13.7%.

"Another reason for liking VE is that it is moving into China big-time, with waterworks in Tianshin and Shibai and environmental service in Juijiang. All in all, France still represents 44% of sales and the rest of Europe 36%. VE does about 10% of its business in the U.S. and the Chinese are part of the remainder.

"VE is diversifying into other services like urban transport in developing countries. But more exciting are its moves to make waste more usable: creatign biogas, recycling metals, paper, plastic. In low-labor countries these 'green' programs can pay off.

"While the European analyst can be viciously negative, Elisenne Verosa of Citigroup calls VE her favorite company in her French coverage universe, although she too worries about the pace of acquistions. In his conference call, CEO Henri Proglio forecast double-digit growth in sales, turnover, net profits and EBITDA in 2008."

Nick Vardy explains, "Water's unique characteristics mean that no other industry has a more compelling -- or more sustainable -- business model. Water remains virtually immune to business cycles. Economists say that demand for water is virtually inelastic-as prices rise, consumption does not decrease. Nor does water have a substitute.

"Veolia, the largest provider of water and wastewater services in the world, supplies drinking water and wastewater treatment services to nearly 117 million around the world in 59 countries.

"Veolia signs long-term contracts with its customers, some as long as 50 years. The contracts start generating positive cash flow after six or seven years. With contract-renewal rates hovering at 93%, the business is a model of stability that provides Veolia with reliable cash flows even in troubled times.

"Investment in adequate water and sanitation facilities may be the safest and the most profitable way to play the rise of China. Indeed, China has more than 20% of the world's population and only 7% of its water.

"Its management sees a lot of opportunities for its business in China, across the board, whether it's water, energy, public transportation, or waste treatment -- and expects its business there to grow by 20% to 25% per annum as far as the eye can see.

"With the stock trading at a forward P/E of about 16x, its combination of double-digit percentage earnings growth and returns comfortably above average capital costs is sustainable for at least the next five years."

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