Last Price:
Date of Initial Coverage
03-Mar-20
Initial Entry Price
$0.060
Returns from Initial Entry
-60%
Opened: 08-Dec-2021
Shares Held at Open: 6,178,333
Alexium International (ASX: AJX) has developed and is selling advanced performance chemicals for cooling and fire resistance.
AJX commercialises its advanced performance chemicals by partnering with and selling its technology to manufacturers in a specific market (bedding, textiles, military uniforms etc).
AJX partners with manufacturers that then on-sell products to end customers with AJX’s thermal management or fire resistant chemicals applied.
IP-backed technology with the potential to enter the lucrative US defence market.
Coliton Capital investment in AJX
Colinton Capital Partners is a well known private equity firm that specialises in taking a “hands on” approach to its investments. Colinton seeks to grow the companies it invests in from $100M's market caps to multiple billion dollar companies. We hope Colinton Capital can help AJX take this journey.
Established, revenue generating business
A stable revenue generating company to hedge against market volatility
Adaptable technology, primed for growth
With a strong sales pipeline and a strategic decision to engage with new markets, we think that AJX is primed for growth.
Objective #1: Cash-flow positive
AJX is currently earnings (EBITDA) positive. If AJX can fund its growth from revenue generating products, it will be less reliant on capital markets for funding.
Objective #2: New Markets: Cooling Technology
AJX’s cooling technology, Eclipsys™, is foundational for the next phase of AJX’s growth into new markets.
Objective #3: New Markets: Flame Resistance Technology
We want to see the existing IP leveraged and AJX launch into different market segments.
Sales risk
AJX sells directly to the manufacturer, not to the customer. This means that AJX will need to ensure that its manufacturing partners have a marketing strategy in place to commercialise products that use AJX’s technology. AJX’s could have the best product in the world, but if it is not marketed property it could hurt its top-line sales.
Technology risk
Although AJX has IP for its unique chemicals, it’s possible a competitor or larger chemical company enters the market with a similar or better product.
Funding risk
Although AJX is EBITDA positive, it does have ~US$2.5M in borrowings to pay down. A market crash combined with slow sales could impact its ability to pay down this debt.
We have invested in AJX three separate times over the last 18 months and have built our long term position.
Our view is that the current share price doesn’t reflect the progressive value added to this business from quarter to quarter over the last year.
We plan to hold AJX as it demonstrates commercialisation traction across its six different market segments, something which we believe could see the share price re-rated at least 500% from our initial entry. At this point we will look to free carry and take some profit while maintaining a long term position for the next 2+ years.
Disclosure: The authors of this article and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities, own 6,178,333 AJX shares at the time of publication. S3 Consortium Pty Ltd has been engaged by AJX to share our commentary and opinion on the progress of our investment in AJX over time.
✅ Initial Investment: @ 6c
✅ Top Slice
🔲 Free Carry
✅ Increased Position: @ 6c
🔲 Free Carry
✅ Increased Position: @ 5.5c
🔲 Free Carry
🔲 Take Profit
🔲 Price increases 300% from initial entry
🔲 Price increases 500% from initial entry
🔲 Price increase 1000% from initial entry
✅ 12 Month Capital Gain Discount
🔲 Hold remaining Position for next 2+ years
Jun 27, 2022
Announcement
Investment Memo: AJX 2022
Objective #2: New Markets Cooling Technology
Alexium International Group Limited (ASX: AJX) has outlined its planned H1 2023 commercial initiatives for microclimate regulation. These include new retail product releases under the Biocool and Eclipsys product lines for body armor, mattress, and top of bed applications.
While AJX’s focus has historically been on the bedding market, the evolution of its product portfolio sees the company primed to grow into Phase II markets — body armor, helmet, and shoe markets.
Over the past three years, AJX has significantly expanded its product portfolio to create solutions for a wide array of microclimate regulation-related issues:
AJX plans to release new products both in its existing platforms and new platforms to round out its microclimate regulation product portfolio. Leveraging this product portfolio is the key to the company’s strategy for driving growth in 1H FY23.
The commercialisation of new microclimate regulation products and improving the market penetration of existing products has been critical to growing revenues.
News of these upcoming products releases is inline with our Objective #2: New Markets Cooling Technology for AJX, as per our 2022 Investment Memo.
AJX also provided an update on our #1 Objective - Cash Flow positive
AJX says that in H2 FY2022 global macroeconomic conditions have suppressed economic growth expectations and this is being seen across the US bedding/mattress market.
As such, AJX expects revenue to fall in H2 FY2022. However, having increased its market share over the past five months, AJX forecast a “significant rebound in bedding revenue once the economy recovers”.
To address lower consumer spending, AJX is accelerating the availability of its technology for higher-volume, lower-value bedding accessories such as pillows and mattress toppers. These Biocool and/or Eclipsys-branded products will be sold in US department stores and online beginning in 1H FY23.
Body armor demand, meanwhile, is largely insulated from general consumer spending. On that front, three customers have completed testing and approved Eclipsys for incorporation in their body armor products and another 30 prospective customers are now evaluating Eclipsys.
Feb 25, 2022
On Friday, AJX announced that it had increased its revenues by ~46.3% with gross margins consistent with 2H FY21 and from the same period last year's results at 40.1%.
AJX showed a US$1.9M loss in its income statement, but the actual cash outflow was much lower at ~$900k and we note that with the addition of the new BioCoolTM products and new customers AJX had increased its inventories by US$600k.
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