DEM - De.mem Limited

[Dona Ferentes]

DEM came out with their Quarterly with a Market Sensitive

Key Highlights
• Strong quarter, generating approx. A$3.3 million in cash receipts, representing approx. 65% growth over prior corresponding period
• March Quarter 2020 confirms the structural shift to recurring revenues, with highest ever recurring revenue contribution to cashflow of 67% in March Quarter 2020
• Strong underlying performance of acquired businesses, with Pumptech Tasmania subsidiary achieving its best-ever March Quarter
• All contracted projects proceeding as expected
• On track for best annual revenues on record
• Strong balance sheet, with A$7.3 million cash as at 31 March 2020

 

[jbocker]

DEM came out with their Quarterly with a Market Sensitive

Where can I find what market sensitive means? To me I think of, the market is touchy and this over-rides the company's fundamentals (even with good news!). Or, this is doing OK for now, but in this climate, many clients at risk of going down and this company could go cactus.
But wouldn't that apply to most company stocks at this level at this time.

 

[Dona Ferentes]

Where can I find what market sensitive means? To me I think of, the market is touchy and this over-rides the company's fundamentals (even with good news!). Or, this is doing OK for now, but in this climate, many clients at risk of going down and this company could go cactus.
But wouldn't that apply to most company stocks at this level at this time.

It would be there in Listing Rule 3.1 - Continuous Disclosure / Market sensitive ?
https://www.asx.com.au/regulation/rules/asx-listing-rules.htm

 

[jbocker]

It would be there in Listing Rule 3.1 - Continuous Disclosure / Market sensitive ?
https://www.asx.com.au/regulation/rules/asx-listing-rules.htm

Ahh got it. I thinking it was 'rating' related. Thanks DF. The report was good news btw, lets hope it continues.

 

[Dona Ferentes]

DEM comes out with a Market Sensitive Announcement today.

I didn't see anything too dramatic. Growth still happening, Positive cash flow a way off.

• On track for record revenues in CY20
• FY20F cash receipts/revenue guidance of $14-18m, driven by ~$9m of recurring revenues and $1.4m FY19 contract rollover, with $3.3m cash receipts in March Qtr2020 (seasonally weakest quarter)
• Visible path to sustainable operating cash positive with diminishing operating cash outflow

Maybe some Corporate action - an acquisition and then going to markets for $$s?

 

[Dona Ferentes]

some nibbles on the BUY side. Order book weighted that way as well (not that it means anything)

But I'd like some orders, sales, action, movement, growth.

( hold; added to at recent lows )

 

[Dona Ferentes]

some nibbles on the BUY side. Order book weighted that way as well (not that it means anything)

But I'd like some orders, sales, action, movement, growth

still nibbling. A decided lack of selling? Reporting soon

 

[Dona Ferentes]

Highlights
• Record half-year cash receipts of $7.4 million in 1H20, up 45% vs $5.1m in 1H19
• On track for record CY20 annual cash receipts
• On track to achieve CY20 cash receipts guidance of A$14-18m, assuming no further global deterioration in the COVID19 pandemic

- bouncing along the baseline, really

 

[Dona Ferentes]

Quarterly out...
Key Highlights
• Inaugural positive quarterly operating cashflow of +$544k, successfully completing key business milestone.
• Record quarterly cash receipts of $5.6m, up 53% vs September Quarter
• Record full-year CY2020 cash receipts of ~$16m, up 36% vs CY2019
• Record growth of acquired businesses, with De.mem-Pumptech (Tasmania) cash receipts up+67% in CY2020 to ~$4.0m and De.mem-Geutec (Germany) up +18% to ~$2.6m in CY2020.
• Strong balance sheet, with $5.4 million cash and term deposits as at 31 December 2020.
• Successful transition to ~58% recurring revenues in CY2020, up from ~38% in CY2018.
• Strong outlook momentum for CY2021, with ~$13m of visible cash receipts comprising ~$3m of CY2020 contracted cash receipts from equipment sales carried over into CY2021 and ~$10m of recurring cash receipts

.... and up 15%.
I like it when small companies achieve what they set out to do (and a bit more)

"We ended the year with the achievement of several key milestones, including our first-ever cash positive quarter, record full-year cash receipts, locking in our structural shift to recurring revenues and stellar performance in our recently integrated businesses, particularly De.mem-Pumptech (Tas). Record order intake during the second half of CY2020 and our growing recurring revenues provide sufficient confidence in continued growth in CY2021, despite challenging global conditions due to the Covid-19 pandemic. "

"Our unique portfolio of hollow-fibre membrane technologies has gained a strong place in the market, which will generate further organic growth opportunities for De.mem. We believe that our balance sheet strength, strong investor support, significant recurring revenues, stable and resilient customer base and one-stop shop offering position De.mem to emerge as a market leader in industrial water treatment".

(HOLD)

 

[Dona Ferentes]

Key Highlights ... CY2020 Consolidated Financial Report

• Inaugural operating cash flow positive of +$544k in December Quarter 2020.
• Strong sales growth, with +41% customer cash receipts growth to $16.5m during CY2020.
• Substantially improved revenue quality, with growing recurring revenues and diversification.
• Substantial growth of strategic business acquisitions.
• Strong balance sheet, with $5.4m cash and term deposits as at 31 December 2020.
• Strong outlook, with ~$14m CY2021 visible revenues (~$10m recurring plus ~$4m contracted revenues) and strong momentum


De.mem’s strong CY2021 outlook is driven by its visible revenues (recurring and contracted) and strong operating momentum.

De.mem commences CY2021 with ~$14m of visible cash receipts (~85% of CY2020 cash receipts) comprising:
• ~$10m of recurring revenue; and
• ~$4m of CY2020 water treatment equipment sales contracted to De.mem, with goods delivery and cash receipts due in CY2021.

De.mem’s growth momentum accelerated in the second half, with $7.4m cash receipts in 1H and $9.1m in 2H.

Other factors supporting the Company’s strong outlook include:
• New Australian sales team in place, managing a growing pipeline across Australia.
• Increasing customer focus on buying from Australian suppliers to avoid global supply chain risks.
• Re-commissioning of projects previously paused due to Covid-19.
• New Zealand growth opportunity as international markets re-open.

 

[Dona Ferentes]

TH for Cap Raising

 

[Dona Ferentes]

TH for Cap Raising

• Accepted commitments for ~$9m from leading strategic and institutional investors through a placement of ordinary equity at $0.28 per share in an oversubscribed capital raising.
• Welcomes follow-on investment from existing institutional shareholders and new investment from several leading institutions, including impact investment funds and specialist ESG funds.
• Share Purchase Plan available for Eligible Shareholders.
• The additional capital is primarily intended to fund the previously announced acquisition of Capic and expansion of the Company’s Build, Own, Operate and services segment.
• De.mem’s indicative post-capital raising position including Placement proceeds, assuming the target SPP of ~$1.2m, after acquisition payment and transaction costs, is ~$11.5m cash and term deposits.

The Company intends to acquire the Capic business subject to final commercial and legal due diligence.

Key Highlights
• Capic provides high-value added, speciality chemicals for blue-chip, West Australian-based mining clients.
• The proposed acquisition provides De.mem with increased scale; geographic diversification into the key strategic market of Western Australia; a complementary product range; a complementary blue-chip, institutional customer base and potential revenue cross-sell synergies.
• De.mem has a strong acquisition value-add track record, with strong growth in recent acquisitions, Pumptech and Geutec.

Capic Overview

• Capic is a well established, Perth-based supplier of specialty chemicals for water treatment applications, focusing on “high value add”, high margin, speciality products.
• Capic has a high quality, institutional customer base including BHP Billiton, Northern Star, Pilbara Minerals and Iluka Resources.
• Capic’s specialty chemical products include scale and corrosion inhibitors, process additives such as defoamers, viscosity modifiers and dewatering aids, reverse osmosis membrane antiscalants and cleaners and a complete range of cooling tower water treatment chemicals.

 

[Dona Ferentes]

the closing date for SPP has been brought forward to 12 April. This is somewhat curious, as the trading price or DEM has been 27c to 27.5c for most of the time since its announcement, while the offer is at 28c.

 

[Dona Ferentes]

the closing date for SPP has been brought forward to 12 April....

and recent days have seen buying return after the 'supply shock'. An update provided today should help sentiment

Outlook

The Company is pleased to report a strong outlook.
• ~$14.5m CY2021 cash receipts for De.mem stand-alone already visible (excluding any potential additional project awards, organic growth, Capic historical cash receipts and cross-sell potential).
• 1H2021 outlook is for ~18-25% organic growth vs pcp, with actual cash receipts for 1Q21 plus contracted and recurring cash receipts for 2Q21 of ~$7.9-8.4m as at April 2021 (excluding any potential additional project awards and impact from Capic acquisition), an increase on $6.7m in 1H20 (see ASX release, June 2020 Quarterly Report, dated 29 July 2020).
• 2Q2021 outlook is for ~33-47% organic growth vs pcp, with actual cash receipts for 2Q21 plus contracted and recurring cash receipts for 2Q21 of ~$4.5-5m as at April 2021 (excluding any potential additional project awards and impact from Capic acquisition), an increase on $3.4m in 2Q2020 ..

(Hold, and token participation)

 

[Dona Ferentes]

Highlights:
• Share Purchase Plan approximately 34% oversubscribed, raises approximately $1.61 million
• Significantly strengthened balance sheet, with indicative post-capital raising and post-SPP cash position of ~$11 million (cash and term deposits as at 31 December 2020: $5.4 million)

Highlight for me was that the "Board has decided to accept oversubscriptions to enable all interested shareholders who applied before the SPP’s closure to participate. " (the catch being the SPP closed a week early .... gotta check those Announcements, folks!!

 

[Dona Ferentes]

De.mem Presents Next Generation Membrane Technology

 De.mem launches new, proprietary graphene oxide enhanced membrane technology
 The new technology provides significant customer benefits including increased throughput and therefore, reduced operating cost, and superior filtration performance
 The new Intellectual Property complements our existing membrane technology portfolio and further positions De.mem as a leader in hollow fibre membrane technology and development

De.mem’s existing technology portfolio comprises three wholly owned, royalty free product families (categories), complemented by additional IP exclusively licenced from world leading research institute, Nanyang Technological University, Singapore. NTU was ranked no. 2 globally in membrane research technology by Lux Research (2013).

De.mem’s wholly‐owned product families / categories are:
1. De.mem’s hollow fibre nanofiltration membrane, which, based on its minimized pore size in the nanometer range, produces high quality treated water in a simple, low‐pressure and low‐energy consumption process;
2. De.mem’s ultrafiltration membrane, an established water treatment process deployed for potable water generation to industrial waste water treatment applications as well as for Reverse Osmosis (i.e. seawater desalination) pretreatment;
3. De.mem’s new GO‐enhanced membrane.

 

[Dona Ferentes]

• Strong sales growth, with revenues up by +28% to $18.1m in CY 2021
• Strong growth momentum, with 11 successive quarters of cash receipts growth vs prior corresponding periods as of 31 December 2021 (pcp)
• Substantially improved revenue quality with revenues from high margin recurring revenue segments up to approx. 70% of total (from 38% in CY 2018)
• As a result, gross margin up to 34% (from 25% in CY 2018)
• Presented “next generation” membrane technology based on Graphene-Oxide enhanced polymer membranes
• Signed key Build, Own, Operate contracts, deploying De.mem membranes with Australian industrial clients
• Substantial growth of strategic business acquisitions, in particular Capic (Western Australia)
• Adjusted EBITDA loss for the CY 2021 reduced to $-2.2 million (from $-3.1 million in CY 2020; amount includes the ongoing investment in Singapore membrane technology R&D)
• Visible pathway to EBITDA breakeven; expected at approx. $25 million in revenues and/or cash receipts
• Well-funded for further growth with $8.6m in cash as at 31 December 2021
• Strong outlook with further growth expected in CY 2022 and strategic focus shifting towards EBITDA break-even

De.mem Chief Executive Officer Andreas Kroell said:

“...Our track record of top-line growth is outstanding. With our strategic focus on our high value and high margin recurring revenue segments, which are now contributing almost three quarters of our revenues, we have significantly enhanced the quality of our revenue and business model. The recently acquired businesses have been integrated successfully, with outstanding growth rates being accomplished.

"Our growth is driven by our advanced membrane technology and comprehensive product and service offering in particular for blue chip industrial clients. Key project awards during the previous year, such as the recent contract with an Australian snow resort, underpin our attractive offering for our customers.

"We expect the growth to continue with the further easing of Covid-19 restrictions in Australia, and with a continued focus on our recurring revenue segments. Along with the successful growth of our business, our strategic focus will shift towards sustainable operating cash flow and EBITDA break even."

- a few too many forceful adjectives in the narrative, for my liking. Otherwise, a result in the right direction; still holding.

 

[Dona Ferentes]

and building a pan-Australian network>

• De.mem Ltd to acquire 100% in the shares of Stevco Seals & Pumps Victoria Pty Ltd, Epping, Victoria
• Consideration will be $1.25 million in cash and $250,000 in DEM shares, plus an additional $180,000 in cash and $30,000 in shares for Stevco’s inventory;
• Priced at approx. 4.5x normalized EBITDA (excluding the payment for Stevco’s inventory and potential milestone payments)
• Strong strategic rationale - Stevco brings an extensive, well-established industrial customer base in Victoria into De.mem group

o Substantial opportunity to cross-sell De.mem’s wide product range and advanced membrane technology
o Strong operational synergies with De.mem-Pumptech business in Tasmania
o Completion of De.mem group’s Australian-wide footprint with nationwide service & support capability
o Recurring revenue focus as large part of revenues generated from operations & maintenance services
o Profitable business with approx. $330,000 in normalized EBITDA per annum generated
o Accretive and well-priced acquisition

• Stevco founders will join De.mem management team
• Integration of Stevco will add further to De.mem’s move towards EBITDA break even

Stevco – Business Overview

• Established in and operating since 2004, Stevco is a well-known supplier of pumps, small water treatment equipment and related operations & maintenance services to industrial and municipal clients in Victoria. Stevco has a reputation of supplying highest quality products and services.
• Stevco’s long-term customer base includes leading industrial players from the food & beverage, agricultural and heavy industrial sectors, as well as a number of municipalities in Victoria.
• The company generated approx. $2.3 million in annual revenues during the past 3 business years (on average) prior to the transaction. It generated approx. $330,000 in normalized EBITDA (adjusted for one-off items). Revenues are largely recurring and a significant percentage is generated from the rendering of operations & maintenance services.

Stevco is based and operates out of their workshop in Epping/Melbourne, Victoria, which will continue to serve as the base for De.mem’s operations in Victoria.

 

[Dona Ferentes]

De.mem Signs Partnership Agreement for Commercialization of Graphene Oxide Membrane Technology; Intends to Enter into North American Market

The new GO membrane technology has been validated in industrial trial projects in Singapore, and is proven to deliver 20 to 40% higher water flux (= throughput, or volume of clean water produced) vs. standard polymer ultrafiltration membranes in combination with a superior rejection of contaminants.

..... still bouncing around 17c.

 

[Dona Ferentes]

Thirsty work

trading halt is requested pending an announcement by the Company to the market in relation to a capital raising