Latest 4C still tracking my forecast of around $28M sales for FY24. Probably not quite going to make a profitable year but it will be close. No detail on North America water filtration sales. Still no new projects announced which is my main concern.

Highest quarterly cash receipts ever recorded of approximately $7.44 million.

Continued double digit organic growth. 22 successive quarters of cash receipts growth versus prior corresponding period (pcp).

Positive quarterly operating cash flows of $82,000.

Two recent acquisitions successfully integrated, now contributing to cash receipts and margins.

On track for record full-year results. 

Still moving in the right direction. Holds with my valuation of 15.5c

Record June Quarter cash receipts of approximately $7 million.

Record cash receipts growth of 20% vs. pcp, entirely organic.

Continued and stable growth momentum, 21 successive quarters of cash receipts growth versus prior period.

Operating cash flows approximately break-even. (-43K)

Two acquisitions integrated, set to contribute to cash receipts and margins in H2.

On track for record full-year results. 

We are looking forward to a record second half of the Calendar Year 2024, with high recurring cash receipts, ongoing commercialisation of our Graphene Oxide enhanced membranes into the USA and other markets, and revenue and margin contributions from the recent Border Pumpworks and Auswater Systems acquisitions”. 

Livewire podcast with FNArena's Rudi. When asked for a microcap on his radar mentions DEM at 44 mins. Not recommending a buy at this point but sees a potential for a re-rate if they continue to execute.

Sales still growing in recurring revenue and bump next quarter from South 32 project completion. My worry is that we have not seen any new project announcements for a while and now we have the statement "Visible path to operating cash positive " which is more vague than before. New purchase to continue roll up strategy.

Small acquisition of the Border Pumpworks business, based in Wodonga in regional Victoria, strengthening the Company’s position in regional markets and further expanding its industrial customer base.

Accretive acquisition: $400,000 consideration, paid fully in cash, valued at approximately 0.4x revenue and 4x normalized EBITDA.

Contributing towards move to EBITDA and operating cash flow break-even: adding approximately $100,000 in normalized annual EBITDA (before synergies) to the Company, and approximately $1.1 million in annual revenues.

Operational synergies: significant operational synergies with Company subsidiary De.mem-Stevco (Melbourne/Victoria), facilitating a seamless integration process and driving cost efficiencies.

Recurring revenue focus: high recurring revenues from service & maintenance work add to De.mem’s high recurring revenue base.

Enhanced regional presence: strengthens De.mem's position in regional Victoria and New South Wales, continuing geographic diversification.

Strategic rationale: well established customer base; high recurring revenues; significant cross-sell opportunities; revenue and cost synergies; seamless integration opportunity; continued regional diversification in Victoria and New South Wales. 

De.mem is delighted to report record March Quarter 2024 cash receipts of approx. $6.6m, a 14% increase compared to prior corresponding period 

Record March Quarter cash receipts of approximately $6.6 million.

Continued Growth Momentum, 20 successive quarters of cash receipts growth versus pcp.

Visible path to operating cash positive

On track for record full-year results underpinned by March quarter results, record June quarter cash receipts expected, ~90% recurring cash receipts, and domestic water filtration market entry. 

Adjusted operating cashflow positive Reported March Quarter 2024 net operating cash outflow is -$521k, as per the Appendix 4C attached to this release. Adjusted for approximately $1.1m in customer payments related to two major projects outstanding as of 31 March 2024, adjusted March Quarter 2024 operating cash flows are positive with approximately $500k.

From the $1.1m in outstanding customer payments, approximately $800k have been received in the month of April 2024 with the remaining balance expected to be paid during the remainder of the June Quarter 2024. Corresponding project costs have almost entirely been incurred and paid for prior to the end of the March Quarter 2024. See section “Strong operational performance” for further details. 

Finally NSF certification for the GO membrane comes through after 2 years. As stated before only $300K in new revenue in the first year but should open up opportunities to enter other markets.

Passed all National Sanitation Foundation (“NSF”) test procedures under NSF Standard 53 for its Graphene Oxide enhanced (“GO”) membrane technology. All technical requirements for the certification are fulfilled and De.mem expects to be officially listed on the NSF website within the coming weeks. 

Company expects over $1m revenue over two years for potable water treatment applications in the North American and Australian markets only.

Further revenue upside from entering new geographies.

Other global distribution partnerships being actively pursued. 

De.mem will initially commercialise its new technology through its existing wholesale distribution partnership with Purafy/Grafoid in the North American market.

Purafy is a division of unlisted company Grafoid Inc., a graphene research, development and investment company founded in 2011, that promotes a range of graphene-based products for applications in key commercial markets. 

End of the year should start to give an indication of how sales are progressing. Latest Investor presentation

Held

CR for a 10% dilution backed by Perennial Value Smaller Companies and Northstar Impact Australian Equities Fund, and two directors. No offer for retail holders. Shows how much I know with predicting no raise this half! Cheap shares.

They need to get a move on with the GO filter certification as CNQ subsidiary NematiQ has secured its first significant sale, valued at AUD 65,000 to a US hemp processor.

Closes $2.2m Placement Ahead of Expected Entry Into New Growth Markets Highlights:

Received commitments for $2.2m at 9 cps. Supporting the execution of contracts and launch of new business such as the company’s new Graphene Oxide enhanced membrane, as well as potential acquisitions

The Issue Price of $0.09 per share represents a 10% discount to the shares’ 5-day VWAP The Placement comprises the issue of approximately 24.4 million New Shares (equivalent to 9.96% of the Company’s current shares outstanding),

Use of Funds The additional capital is intended to fund: the execution of existing contracts, new business opportunities such as the launch of the Company’s new Graphene Oxide enhanced membrane, potential mergers & acquisitions, costs of the Placement, and general working capital. 

From the CNQ announcement

The hemp extraction equipment market is estimated to be US$45.5m in 20221 , with a 12.8% CAGR. Filters in this sector have a faster replacement rate in comparison to many other industries. The majority of the market are not using membrane separations, and as such a shift to membrane separations will increase the value share of the equipment supply market in collaboration with Molecular Forces. Over the past year, NematiQ has transitioned from the development phase to focusing on educating the market and commercial sales. Our Graphene Membranes stand out due to their unique properties, such as high flux, the ability to reject organics without rejecting salts, and the anti-fouling nature of the membrane surface that results in lower fouling compared to conventional polymeric membranes. In other applications such as drinking water treatment, the Graphene Membrane has been very successful in trials for the removal of naturally occurring organic matter (NOM) in drinking water applications. The Graphene Membrane can remove organics without removing the beneficial salts resulting in lower energy use, higher water recovery and more environmentally friendly routes for byproduct disposal. 

The market penetration of NematiQ’s Graphene Membranes is increasing, with sales in the drinking water sector for customers in Australia and Europe, and into the reverse osmosis pre-treatment market with some of the world’s largest manufacturers for testing in their flowsheets. 

Despite record quarterly cash receipts of $7M still cash flow -ve $290K. Annual loss of $1.5M

Completion of South 32 project and one other major project now scheduled for early 2024, with project payments of ~900k scheduled for H1 CY 2024. The incoming customer payments will have a positive impact on the operating cash flows in the upcoming March and June Quarters 2024.

Recurring cash receipts >90% of total cash receipts; recurring cash receipts growth approx. 15% vs. prior year (CY 2022)

Total cash receipts in the calendar year are approx. $24.8m.

Cash receipts in the December quarter are up by approx. 8% vs. $6.7m in the prior corresponding period (pcp). De.mem advises that full CY 2023 revenues are expected to grow in the range between 12% and 18% vs. CY 2022

Plugging these numbers into my basic valuation (working on a 15% growth and sustained margin) gives a 2024 SP of 15.5c current Price to Sales of 1x and a current SP of 10.5c

GO filtration certification still ongoing "During the September Quarter 2023, a key milestone had been met, with De.mem’s membrane passing a critical high pressure testing procedure performed by the NSF. The conclusion of the process is expected shortly."

Capic specialty chemicals doing well. "We are particularly excited about the development of our specialty chemicals business division located in Perth, which achieved top-line growth of approx. 80% within just 3 years since acquisition of the business in March 2021."

Worrying part is no new projects mentioned and break even has been dropped just "Positive outlook for continued growth in CY 2024 with strong recurring cash receipts"

Still waiting on NSF certification to provide a potential catalyst but not going to affect cashflow until H2 at the earliest. $2.4M in cash so shouldn't need to raise in the first half.

After 2 positive quarters a bit of a miss on the last despite record June quarter revenue of $5.8M. $376 K +ve 2nd quarter needed to maintain guidance of cashflow +ve year. 4th quarter is historically higher but going to be close. GO membrane filter approval still predicted next half. "The conclusion of the process is expected for H2 CY 2023, preparing for commercial launch of domestic water filtration product in H2 2023"

Adjusted Net Operating Cash Outflows of ~$-155,000 in the June Quarter 2023

De.mem reports net operating cash outflows for the June Quarter 2023 of approx. $-395,000 as per the Appendix 4C.

The net operating cash outflows include: A milestone cash payment made to the previous owners of Stevco of $50,000,

A total of approx. $190,000 in advance payments for the purchase of components for the $1.5m South 32 project, no offsetting customer payments were received during the reporting quarter, as the vast majority of the customer payments is scheduled for the December Quarter 2023, supporting a strong outlook for H2 CY 2023.

De.mem advises that the June Quarter 2023 cash receipts exclude any contribution from 4 major projects that have already been awarded to the company and which are currently in the manufacturing phase. 

Singapore BOO plant completed and now revenue generating.

Catalyst could be GO domestic water filter otherwise a slow and steady build in recurring revenue.

Revenue tracking slightly below my $25M forecast revenue used in valuation but on a higher margin. SP has moved off lows.

Held in SM and RL

Nematiq a subsidiary of Clean Tech Water (CNQ) promoting a graphene oxide water filtration membrane. DEM still waiting on approval to sell its domestic graphene oxide filter into North American market.

2nd operating cash flow +ve quarter(just ) for DEM although still EBITDA -ve by 240K. $5.8M in receipts in what is normally their quietest period. Two new contracts in AUS with revenue in CY 23. GO domestic filter commercial launch by 1H23 following certification.

Highlights

Highest quarterly cash receipts in a March quarter (approx. $5.8m)

Growth momentum continues with 16 successive quarters of cash receipts growth vs prior corresponding period

Positive net operating cash flows of ~$19,000

Second consecutive quarter with positive net operating cash flows

Strong results achieved in spite of historical seasonality within the business; the March quarter historically typically only delivering approx. 20% of total annual cash receipts

Strong progress continues operationally with a number of contract awards received during the reporting period – including new contracts for the supply of water treatment equipment to customers in Queensland and Tasmania

Progressing towards NSF (drinking water) certification for new Graphene Oxide membrane; preparing for commercial launch of domestic water filtration product in H2 2023

Quarterly cash receipts

Held in SM and RL

New director with experience in kidney dialysis. Plenty of clean water needed with some regional areas not having dialysis due to poor water quality requiring significant travel. Water treatment and the use of membranes have a key importance for dialysis.

Mr. De Wit is a senior corporate executive who has worked in several locations across the globe. He has been the CEO of Asia Pacific for Fresenius Medical Care since 2016. In this role, he is also responsible for the company’s operations in Australia & New Zealand.The company operates more than 4,100 dialysis clinics and 42 production sites for dialysis products globally. In Australia alone, the group has 23 dialysis clinics and more than 350 staff.

"Investing in Indigenous health & education to close the gap"

• $45 million for 30 four-chair dialysis units to provide better renal services across Australia.

"Water quality and availability concerns in drought for dialysis patients"

Dialysis is a vital treatment, requiring approximately four billion litres of top quality water in Australia every year to keep people with acute kidney conditions alive.

Every dialysis patient uses 3,000 to 4,000 litres of water a week for treatment to remove waste from their blood.

Good to see a +ve Q of $203K (although after business acquisition, plant, IP and lease cost -$384K). $5.1M cash. +ve SP movement on announcement.

NSF application projected to be complete 1H23for GO domestic water filter.

Key Highlights

Highest quarterly cash receipts (approx. $6.7m) and annual cash receipts in the Company’s history (approx. $22.9m)

Positive quarterly operating cash flow recorded (approx. +$200,000)

Growth momentum continues with 15 successive quarters of cash receipts growth vs prior corresponding period

Key milestone achieved in CY 2022 with continued recurring revenue transition

Delivered on expectations with recurring cash receipts of $19.5m in CY 2022 (+41% vs CY 2021)

>85% of cash receipts in CY 2022 recurring, up from 70% in CY 2021 (38% in CY2018)

34% gross margin (HY 2022), up from 19% in CY 2017

Strong progress continues operationally:

$1.4 million contract award for the supply of a water treatment plant to South 32

On track to deliver on $2.1 million Build, Own, Operate plant to Givaudan by Q2 2023

Progressing with NSF product certification of new Graphene-Oxide membrane filter technology

Integration of remaining 25% of German De.mem-Geutec subsidiary completed

Company well-funded with cash plus term deposits of approx. $5.2 million as of 31 December 2022

Strong outlook for 2023 – Expect to maintain strong top revenue line growth with continued focus on profitability

During H1 2022, De.mem initiated a process to obtain approval for use of the new GO membrane technology for potable water treatment applications by the NSF (National Sanitation Foundation, the American regulator for drinking water related products). De.mem has been liaising with the NSF since then, including a meeting with NSF representatives in the USA during the December Quarter 2022. The conclusion of the process is expected for the first half of CY 2023. 

DEM slowly moving towards breakeven. Growing recurring revenue. No news on GO NSF approval process other than "Results are expected towards the end of the CY 2022."

Best ever September Quarter in Company history with approx. $5.5m in cash receipts.

Cash Receipts are up by approx. 8% vs. $5.1m in the September Quarter 2021. Total cash receipts in the 9 months ended 30 June 2022 are $16.2m, up by approx. 17% vs. $13.8m in the 9 months ended 30 September 2021. 

In absolute numbers, De.mem has generated $13.8m in recurring cash receipts in the 9 months ended 30 September 2022, reflecting of 47% vs the prior corresponding period in 2021 ($9.4m in recurring cash receipts recorded in the 9 months ended 30 September 2021).

Net operating cash outflows were approx. -$668,000 in the September Quarter 2022. The difference between the net operating cash outflows (-$668k) and the EBITDA loss (-$230k) mainly results from changes in working capital due to timing differences on payments (in particular, customer payments received after the end of the quarter).

De.mem forecasts recurring cash receipts of $17.5 - 20m for the full CY 2022, corresponding to a growth rate between 28% - 46% vs. CY 2021 recurring cash receipts of $13.8m. 

Strong focus on generating recurring revenue, with recurring revenues up to > 90% of total cash receipts in September Quarter 2022 (up from 38% in CY 2018)

Signed key new contracts during/after the quarter:

$2.1 million Build, Own, Operate agreement with Givaudan over 6 years

$1.4 million contract for the supply of a water treatment plant to a subsidiary of South 32

Signed commercial partnership to take new Graphene-Oxide membrane filter technology into North America for domestic water treatment applications

Completed integration of profitable German De.mem-Geutec subsidiary with acquisition of remaining 25% stake

Quarterly EBITDA improved to approx. $-230,000 (unaudited); targeting quarterly EBITDA and/or operating cash flow break even by H1 CY 2023

Company well-funded following $3 million capital raising with cash plus term deposits of approx. $5.7 million as of 30 September 2022 

$1.4M contract with South32 subsidiary for a water treatment plant. Completion by middle of CY23. No detail as to whether this will lead to higher margin recurring revenue. Mining sector a big water treatment market but capital intensive initially so needs the ongoing chemical sales to meet the growth expectations.

Appreciate @ValueDownunder sharing their thoughts. Their deep dive is very thorough and looking at the latest financials there are concerns.

The report showed only small growth in revenue ($9.2M vs 9.1, revenue in AUS its largest segment went backwards $7.3M vs $7.7 however the mix shifted majorly to goods over equipment. Singapore and Germany increased) and margin (33.6 - 34.1%) although they frequently refer to a shift to higher margin income in 2H 22. Also the 1H 21 figures are described as being skewed

"In the prior corresponding period (H1 CY 2021) there was a relatively large contribution from the Company’s projects business segment to accounting revenues; approx. $3.2 million or 35% of total revenues in H1 2021 were derived from projects & equipment sales which are lower in margin. Some of the corresponding cash receipts have been received in H2 CY 2021 and H1 CY 2022."

"De.mem advises that further improvements in operating cash flows and profitability are expected for H2 CY 2022 with the addition of two important previously announced BOO contracts beginning to generate revenue"

"De.mem upgraded the forecast recurring cash receipts and/or revenue for CY2022 to $17.5m - $20m (up from $16.5m - $19m), corresponding to a growth rate of between 28-46% vs CY 2021 recurring revenue."

Inflationary costs are given a brief mention although it seems unlikely that they can have factored in the current rate of increase in long term contracts.

"The Company is pleased to achieve this margin growth in what has been a particularly challenging period due to cost pressures faced in light of supply chain issues and inflation. With respect to its long-term BOO contracts, De.mem typically figures in reasonable assumptions with respect to inflation, salary and supplier price increases."

The point made in the bear case about IP is valid however is only one of the stages of filtration. The Graphene oxide potential is interesting in that it is only targetting the under bench domestic market at the moment and it will be important that they can make that work.

Clearly the installations are "sticky" (Rio 3 yr contract extension has been ongoing since 2016) in that they are longer term contracts but the question is whether the selling of the high margin chemicals/ services can balance out the capital costs of the build/ install.

The company cites Givaudan as an example of potential having contracted their 4th location ($2.1M minimum over 6 years) and there being 185 locations worldwide.

They are focussing on EBITDA loss reduced to $800,000 in H1 CY 2022, thereof $470,000 in Q1 and $330,000 in Q2. De.mem is committed to its objective of achieving quarterly EBITDA and/or operating cash flow break even by H1 CY 2023. This will be the key target that they can't miss if the SP is to hold.

I hold a fair chunk of DEM in RL and I am down 50%. I am going to wait for the next half to see if the growth continues or has stalled

Raise of $3M gives a 19% discount off an already low SP and a 10% dilution for us mug punter retail holders. Already had $3.7M cash so not sure about the timing. Smashes my valuation.

De.mem announces A$3m Placement to acquire remaining stake in German subsidiary and support Build, Own, Operate opportunities 

De.mem has received commitments of approximately A$3.0m from institutional and sophisticated investors through a placement of ordinary equity at a price of $0.14 per share

The Placement was strongly supported by new and existing institutional and sophisticated investors

The capital raised will fund the acquisition of the remaining 25% ownership of De.mem-Geutec GmbH as well as several Build Own Operate opportunities. Additional funds will be used to allow future acquisitions and general working capital.

The Issue Price of A$0.14 per share represents an 18.6% discount to the 5-day VWAP (Volume Weighted Average Price) to 25 July 2022. The Placement comprises the issue of approximately 21.4 million New Shares (equivalent to 9.61% of DEM’s current shares outstanding)

DEM in trading halt. 4C shows growth continuing. Revenue in line with my valuation and FCF predicted to be slightly earlier. While SP is at my bear case level. Further mop up business purchases could change this but purchases so far have been EBITDA +ve. Cash at hand should cover costs to projected FCF+ve.

The Company remains committed to its objective of achieving quarterly EBITDA and/or operating cash flow break even by H1 2023.

High-margin recurring revenue segments up to approx. 85% of total cash receipts in H1 CY 2022 (up from 38% in CY 2018)

Strong outlook for recurring revenue growth in CY 2022; recurring cash receipts forecast increased to $17.5 - 20m for CY2022 (implied growth of 28 - 46% vs CY2021 recurring revenue)

Quarterly operating cash outflows reduced to approx. $470,000. Although with purchase of Stevco Seals & Pumps Victoria total -$2M quarter. -$3.4M 6 month with cash of $3.75M suggesting no need for further raise if growth is on target.

De.mem is delighted to report cash receipts of $5.6m, the Company’s highest ever cash receipts in a June Quarter. Cash Receipts are up by approx. 6% vs. $5.2m in the June Quarter 2021. Total cash receipts in the 6 months ended 30 June 2022 are $10.7m, up by approx. 23% vs. $8.7m in the 6 months ended 30 June 2021. 

Invoicing for two previously announced Build, Own, Operate projects starting from June/July onwards. The successful delivery on both contracts will have a positive impact on De.mem’s cash receipts, revenues and margins from the 2nd half of CY 2022 onwards. These two projects will add annualised revenues of approx. $600,000 in total.

The first 6 months of a calendar year typically account for approx. 40-45% of annual cash receipts (H1 2021: ~44%; H1 2020: ~42%). 

DEM entering into an interesting revenue +ve partnership agreement with Purafy Clean Technologies. Not huge to start but growth potential.

De.mem considers the commercial partnership agreement significant as the Company receives: - exclusive access to Purafy’s unique Graphene Oxide nanoparticles as a key material for the manufacturing of its GO membrane technology, resulting in a new and unique product within the water treatment industry; - the legal rights to promote Purafy’s domestic water treatment products into Australia and Singapore, which, potentially, will generate significant revenue streams for the Company.

Under the agreement, De.mem receives exclusive access to Purafy’s unique Graphene Oxide nanoparticles.

In exchange, De.mem grants exclusive rights to Purafy for the use of De.mem’s GO membrane, within Purafy’s portable and domestic water treatment products.

De.mem intends to promote Purafy’s domestic water treatment products into Australia and Singapore initially.

The commercial launch into the North American and Australian markets is pending the completion of regulatory product certifications, which are expected to be achieved within the next 6-12 months.

De.mem conservatively estimates its revenues from the new partnership during the initial market introduction phase at from the product certification respectively, for the North American and Australian markets only.

There is substantial additional growth potential beyond year 2, and from the launch of the technology into other regions.

Under the agreement, De.mem receives exclusive access to Purafy’s Graphene Oxide nanoparticles for use within De.mem’s polymer ultrafiltration membrane. De.mem has tested Purafy’s GO nanoparticles extensively and selected over several other, similar materials. Its unique properties allow De.mem to manufacture GO enhanced polymer-based ultrafiltration membranes with significantly enhanced filtration characteristics.

The new GO enhanced membrane technology is particularly well suited for domestic water filtration applications. As a result of the membrane’s high throughput, the size of the membrane cartridge can be reduced significantly while maintaining the same treatment capacity. This is a key requirement for domestic water filtration applications, which are typically exposed to space constraints. The global market for domestic water filters is a large commercial market growing faster than the overall water treatment industry. It is estimated at USD 8.6 billion in 2018 and expected to grow by 15.9% per annum to reach approx. USD 24.1 billion by 2025 (Source: Grand View Research, Home Water Filtration Market Unit Market Size, 9 July 2019).

The commercial launch will immediately follow the achievement of regulatory product certifications. The relevant approvals are the NSF (National Sanitation Foundation) certification for the US, and the WaterMark certification for Australia. The respective process has been initiated and its completion is expected within the next 6-12 months.

Rio makes a longer term committment. Not huge value but shows confidence in DEM's offering

De.mem Signs $1.7m Service Contract. 3-year service contract with Rio Tinto.

The new 3-year service contract effectively is a long-term extension of an existing arrangement with Rio Tinto, one of the world’s leading mining companies, to manage the potable water and sewage treatment plants at the Amrun mine in Queensland, Australia.

De.mem has been operating the water treatment facilities since 2016, based on short term, revolving contracts and purchase orders respectively. This new agreement gives certainty to the business for another 3 years, beginning from July 2022. The 3-year agreement has a value of approx. $1.7 million in revenues. Additional revenue can be secured from the cross sell of additional equipment, specialty chemicals and other consumables. 

Good appointment to the board of DEM with ANZ contacts and experience

Ex-Veolia Australia & New Zealand CEO Joins De.mem’s Board of Directors. Mr. Danny Conlon is joining the De.mem board effective today.

Most recently, from 2018 to 2020, Mr Conlon was Veolia’s CEO and Managing Director for the Australia & New Zealand region. In this role, Mr Conlon oversaw Veolia’s broad portfolio of water, waste and energy operations, with a strong focus on driving the growth of recurring revenues and the company’s service business.

Veolia’s Australian & New Zealand water and wastewater business serves many clients from local and state government authorities to the oil & gas, mining, health care, food & beverage industries.

Mr Conlon is joining the De.mem board as a non-executive director. In this new role, he will provide De.mem advise in particular with respect to the strategic development of the Company as well as its sales & marketing, operations and financial performance. He also brings a vast network within the Australian & New Zealand water, waste & recycling industries to De.mem.

Latest 4C puts a date on EBITDA break even of H1 2023 good organic growth and no churn in significant segments. Strong ESG statement in 4C but still seems underappreciated @20c. Still hold with valuation of 26.5c

Focus shifting towards profitability, with quarterly EBITDA break even expected by H1 2023

Best ever March quarter in Company history with approx. $5.142m in cash receipts, approx. 49% above prior corresponding period (pcp). The March Quarter typically accounts for approx. 20% of annual cash receipts only (Q1 2021: ~18%; Q1 2020: ~20%).

De.mem generated organic growth vs pcp of approx. 23%

2 commissioned contracts are expected to start generating revenues/cash receipts from the end of the June 2022 quarter onwards, which will contribute to De.mem’s revenues and margins from the 2nd half of the CY2022.

Zero Churn in the BOO and O&M Segments De.mem is pleased to advise that it has never lost a material contract with respect to its BOO and O&M agreements since the Company’s inception to a competitor (material contract defined as annual revenues above $100k). The Company’s BOO and O&M business currently generates approx. $4 million in revenues per annum, including the sales of consumables to the respective client sites. These respective segments due to their stickiness and high predictability in revenues are thus a key focus point for the Company moving forward. 

Robust balance sheet with approx. $6.7m in cash and term deposits to support strong growth prospects

Strong outlook for further growth in CY2022, with focus on recurring revenue segments

Recurring cash receipts of $16.5 - 19m expected for CY2022, growth of 20 - 38% vs CY2021

Net operating cash outflows of approx. -$916,000 during the quarter exclude late customer payments received after the end of the quarter, in early April, of approx. $450,000. Adjusting for the late payment the net operating cash outflows would have been approx. -$465,000.approx. 15% reduction to the underlying EBITDA loss of -$550,000 per quarter recorded on average during CY2021 

DEM expanding their presence in Vic with an acquisition. Becoming a national presence. Price seems reasonable but not cheap when considering the bolt ons.

De.mem Ltd to acquire 100% in the shares of Stevco

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) Stevco brings an extensive, well-established industrial customer base in Victoria into De.mem group

Substantial opportunity to cross-sell De.mem’s wide product range and advanced membrane technology

Strong operational synergies with De.mem-Pumptech business in Tasmania

Completion of De.mem group’s Australian-wide footprint with nationwide service & support capability

Recurring revenue focus as large part of revenues generated from operations & maintenance services

Profitable business with approx. $330,000 in normalized EBITDA per annum generated

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

Still not quite FCF +ve (-308K down from -1.08M) but on track for next quarter? Greater revenue from high margin recurring revenue.

RECORD CASH RECEIPTS, CONTINUED GROWTH EXPECTED

• Highest quarterly cash receipts in company history with approx. $5.95m

• Total annual customer cash receipts of approx. $19.8m, approx. 24% growth over CY 2020

• Strong growth momentum, with 11 successive quarters of cash receipts growth vs prior corresponding periods (pcp)

• Cash receipts from high-margin recurring revenue segments up by 81% vs. pcp, to approx. 73% of total cash receipts

• Significantly reduced operating cash outflows with approx. $-308,000, including an amount of approx. $-130,000 in spending related to membrane technology development and the corresponding manufacturing scale up

• Strong balance sheet with approx. $8.6m in cash supports strong growth prospects, in particular further Build, Own, Operate opportunities, deploying De.mem’s advanced membrane solutions

• New Build, Own, Monitoring, Transfer contract for waste water treatment with Australian ski resort announced

• Recently acquired Capic business in Western Australia exceeding expectations

• Outstanding acquisition track record with all three bolt-on acquisitions since 2019 achieving significant growth

• Strong outlook for further growth in CY 2022

Not a huge contract. $1M over 5yrs. It would be interesting to know some details of how the BOMT contract differs from the BOO in terms of capital outlay and revenue over life. Low temp environments can be tricky so hopefully they have it worked out. It doesn’t get to zero very often in Singapore.

De.mem signs first water treatment contract with Australian Snow resort

8 December 2021: Australian-Singaporean water and waste water treatment company De.mem (ASX:DEM) (“De.mem” or “the Company”) is pleased to announce the signing of a new Build, Own, Monitor and Transfer (“BOMT”) contract, contributing to the Company’s objective of growing recurring revenues. It is the first time that De.mem’s products and technology is deployed within a ski & snow resort, designed to operate under extreme weather conditions.

Water Treatment for Australian Snow Resort

Under the BOMT contract, De.mem will treat the waste water from an Australian snow resort. The treatment process is based on a Membrane Bioreactor (MBR) process incorporating hollow fibre membrane technology. The treated water is of high quality and can be re-used/recycled by the customer.

Under the contract, De.mem will remotely monitor the performance of the plant using the Company’s advanced monitoring platform, and provide support to the customer’s local operations team.

The contract has a term of 5 years with a total value of approx. $1,000,000 in revenues and can be terminated only with cause. It is expected to start in the June Quarter 2022.

The waste water treatment plant will be deployed at the Selwyn Snow Resort in the northern part of the Kosciuszko National Park, a day visitor snow resort with easy access from Canberra and New South Wales. The Selwyn Snow Resort is currently preparing for its planned re-opening on 11 June 2022.

System operating under extreme weather conditions

The system to be deployed under the BOMT contract has been designed to operate under extreme weather conditions. In particular, it will be able to operate at temperatures near or below zero degrees Celsius and is the first time that De.mem’s technology has been deployed in such a low temperature environment within a ski resort.

There is significant market potential for the Company by expanding the offering of this product into similar locations, with 15 ski resorts in Australia and 39 in New Zealand alone, and a total of 6,109 ski resorts worldwide (source: www.skiresort.info).

Growing recurring revenues

The new contract award contributes further to De.mem’s strategy of promoting and developing its recurring revenue segments, which have been driving overall revenue growth over the past years.

It also advances De.mem’s position with clients from the hospitality sector, as De.mem recently announced the award of another service contract for a water treatment facility at an Australian holiday resort (see ASX release dated 15 September 2021).

Still cashflow -ve but good growth of acquisitions and recent contract cost and payments falling across the quarter make a rough outflow of 500K. New good contracts (hopefully following the graphene oxide announcement) in the next quarter could finally see FCF.

Highlights

• Record September Quarter with $5.1m cash receipts, ~40% growth over September Quarter 2020 third-best quarter of cash receipts, exclude an additional approx. $630k in late payments received from three Australian customers within the first three working days of October 2021. The corresponding work was fully completed with almost all cost incurred prior to 30 September 2021.

• Strong growth momentum, with 10 successive quarters of cash receipts growth vs prior corresponding periods (pcp)

• Continued recurring cash receipts growth to ~68% of total (9 months YTD), from 38% in 2018

• New Build, Own, Operate (“BOO”) and service contract awards received

• Record balance sheet supports strong growth prospects, in particular further BOO opportunities, deploying De.mem’s advanced membrane solutions, 8 quarters cash @8M

Operating cash outflows of approx. -$1.08m in the September Quarter 2021 are approximately summarised as follows:

• Approx. -$500k relate to the advance funding of manufacturing cost for the three above-mentioned Australian contracts completed prior to 30 September 2021, for which corresponding customer payments were received in early October. The payments will be reported as part of December Quarter 2021 cash receipts and will add to December Quarter 2021 operating cash flows.

• Approx. -$200k relate to the funding of membrane manufacturing capabilities and membrane technology research & development in Singapore

• The remaining approx. -$380k relate to working capital funding for the Australian group entities, which includes the Company’s investment into the build-up of an extended, nationwide sales organization in Australia

In the September Quarter 2021, De.mem-Capic acquisition already exceeded its historic performance, generating approx. $1.1 m in revenues (unaudited) during the 3-month period.

Annualized, De.mem-Capic already tracks approx. 29% above its historic 3-year average revenue of ~$3.3m

Dem continues to grow revenue

2 new service and Build, Own, Operate and Transfer (“BOOT”) contracts,

The two new contracts are summarised below.
? An Operations & Maintenance contract for approx. $300,000 in revenues per annum, commencing immediately, whereby De.mem will operate & maintain the water treatment facilities of an Australian holiday resort. The customer’s facilities incorporate an existing, membrane-based water treatment process.
? A Build, Own, Operate and Transfer (“BOOT”) contract for approx. $400,000 in revenues per annum, commencing March 2022, whereby De.mem will design, manufacture, commission, operate & maintain a membrane based water treatment plant for an industrial customer in Australia. The treatment plant incorporates De.mem’s Ultrafiltration membrane technology as its key treatment process. The membrane technology to be deployed is an environmentally friendly, low energy consumption filtration process that delivers superior treatment results.

Report and Buy rating from ATM

“We think the value of DEM’s technology is being under-appreciated by the market. There have been 2 recent IPOs in Europe where peers with similar technology to DEM have been priced at vastly richer valuations, even though they represent a similar product offering – with the market valuing environmentally friendly technology. NX Filtration listed in July and now has a market cap of $653m, with 2021 full year revenue estimate of about $2.5m, it is trading on a massive price to revenue multiple of 261x. Aquaporin is another that has just listed and has a current market cap of $1,484m, with a 2021 full year revenue estimate of about $3.2m, trades on a whopping price to revenue multiple of 463x. In contrast, we expect DEM to generate ~20m AUD in 2021, and its shares have a market value of 61m AUD.
We believe over the medium-term there will be beneficial synergies from the recent acquisitions and there is plenty of growth potential for the underlying business – which is still in an early phase of its business cycle and we reiterate our BUY rating.”

https://www.atmstrategy.co.nz/

https://hotcopper.com.au/attachments/de-mem_september_2021-1-pdf.3570599/?filename=De.mem_September_2021+%281%29.pdf

Should provide a bit of a moat over other water treatment companies in the short term. Folded graphene in research development but this seems closer to market.

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

Internal testing demonstrates:

20?40% increased water flux (throughput, or volumes of clean water produced) over standard polymer membranes, reducing the operating cost per liter of filtered water produced.

Ultra?high water flux for certain variations of the technology.

Increased rejection (rejection of contaminants, or filtration performance) over standard polymer membranes.

The Company is currently commencing industrial scale pilot projects.

Demem 1/2 yearly

Strong growth( largely organic)+44%, slightly increased margins +2%

Recurring growth 65%

FCF negative mainly due to R&D, expanded membrane production facility and increased sales and marketing staff (1.1M)

Majority of contracts usually H2

Only part year input from Capic acquisition.

Capic Milestone performance payments for 15% revenue increase by 12/21 and 35% 12/22 vs FY20

2 new projects commissioned in H1 with ongoing revenue 

Australian contracting largest growth by region

9.9M cash

Risks

Possible covid impacts on Australian businesses  but so far limited 

No new contracts announced

Hopefully increases in sales and marketing staff will lead to some new contracts. Still positive for long term growth in the fragmented water treatment market.

Quarterly activities

Record June quarter +53% over 2020

Reccuring cash receipts 65% of total

9th quarter of consecutive growth 

First cross sales from Capic acquisition 

Possible COVID lockdown effects

Cash outflow of 530k

9.5M in cash

https://static1.squarespace.com/static/5af533a312b13fb602fe7d7b/t/5fb4b30ea1974739ecc5184c/1605677843941/De.mem+research+update+19+Nov+2020.pdf

Figures appear to be in line with Pitt St research DCF valuation from Nov 2020

“Our blended valuation (equally weighted between DCF and EV/Sales) remains largely intact at A$0.62 – A$0.72. We believe that re-rating will be driven by DEM’s growth in recurring revenue base, new acquisitions, and attainment of cash breakeven. “

Disclosure: Held