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Alexium receives Buy Recommendation and A$1.20 target from broker

Moelis & Company noted: "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."
Alexium receives Buy Recommendation and A$1.20 target from broker

Alexium International Group Ltd (ASX:AJX) has received a Buy Recommendation and a A$1.20 prine target from broker Moelis & Company.

Alexium shares last traded at A$0.60. The following is an extract from the report.


Event

AJX released its 4C on Friday 29 July. Whilst net operating cash flows were better than our estimates (net outflows of $10.1m vs. Moelis estimates of net outflows of $10.5m), we were hoping to see higher cash receipts from Customers, especially if AJX is on-track to meet its CY16 revenue guidance.

At the upcoming FY16 result, we are looking for 2H16 revenue of US$3.7m to US$4.6m which represents 20-25% of AJX’s CY16 US$18.5m revenue guidance.


Customers in the pipeline but a need for capital?

AJX commented that it has seen the number of clients in the total sales pipeline increase by 129% in the last 6 months, with a 95% increase in clients in the scale-up (or implementation) stage.

The company also commented that, “There is not a need to raise capital unless there is a large contract or a significant licensing agreement requiring significant working capital.”

We understand that AJX has sufficient working capital for the foreseeable future (including reaching its CY16 US$18.5m revenue target).

If AJX won a major contract that required significant capital, it would be a vote of confidence for the technology.

It is also worth noting that as AJX’s products increase in demand, the company could adapt its business model so it shares (or passes through) the cost of R&D, chemical sourcing etc.


Investment View

We reiterate our 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.

 

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