Alexium International Group Ltd (ASX:AJX, OTCQX:AXXIY) has received a Buy recommendation with a A$1.20 target price from Sydney broker Moelis Australia Securities Pty Ltd.
Alexium shares last traded at A$0.67 at the time of the report. The forecast capital return is circa 79%. The following is an extract.
Event
We have initiated coverage of Alexium International Group (AJX) with BUY rating and 12 month target price of $1.20.
We view AJX as a strategic investment leveraging increased scrutiny on stringent fire safety regulations and banning of toxic and harmful chemicals in traditional brominated and halogenated flame retardant products.
Investment View
AJX is a US-based speciality chemicals business focused on the development of safe non-brominated chemical solutions that can be applied to surfaces to make them flame retardant.
Our BUY thesis is predicated on the following:
The range of Alexiflam products are unique in the market place
To our knowledge, no other player has safe flame retardant chemistry with minimal impact to the surface's existing properties while meeting customer needs.
In our opinion, regulatory change will be the biggest driving factor in AJX’s market share gain in the near term.
Studies have shown that brominated and halogenated products appear to be persistent and bio-accumulative and can disrupt thyroid and estrogen hormones, causing developmental effects.
Since 2003, 12 US states and Washington DC have banned certain types of brominated chemicals and the EU and Australia have banned brominated and halogenated products.
AJX has extensive IP with over 20 patents in 9 countries
AJX is of the view that safe flame retardant chemicals would be very difficult to replicate without an infringement on its patents.
The current patents are for ~20 years, no current patent has <16 years to expiry and they cover all markets AJX currently operates in and seeks to enter.
AJX’s partnership system with toll manufacturers, finishers and sales agents provide global scale and create barriers to entry
AJX's partnerships create a huge advantage and increases its accessibility to global customer opportunities.
Competitors cannot handle the wide range of supply chain variations AJX can by partnering with these companies.
It also makes AJX far more flexible if a change to a customer’s supply chain arises.
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