DEM trying to leverage off the gold price surge with another bolt on acquisition. Unfortunately despite previous comments from the board that they could now access debt due to being cash flow positive they decided to go with a cap raise @ 10.5c which will constrain the SP well below my value estimate.

Appears to be a reasonable price paid, which values the company at ~ 3.7 times pre-tax profits. 

HIGHLIGHTS  

Acquisition of Core Chemicals, a specialty chemicals supplier to gold mining clients in Western Australia, for a total consideration of approximately $3m.  

Completed oversubscribed placement of De.mem ordinary equity of $3m at 10.5 cents per share.  

Significant revenue synergies through new gold mining client acquisition and cross-sell of expanded product and services portfolio  

Pro-forma adjusted EBITDA of $1.6m for the 12 months ended 30 June 2025. 

Core Chemicals’ products are complementary to De.mem and will be offered to De.mem’s existing 15 gold mining clients. In turn, De.mem’s diversified product offering will be offered to Core Chemicals’ existing gold mining clients. 

The acquisition provides a significant opportunity to expand Core Chemicals’ offering into the Eastern states of Australia as well as the Pacific region. Core Chemicals currently only operates in Western Australia.

 Core Chemicals is simple to integrate into De.mem’s existing operations in Perth, which is expected to result in approximately $100k of cost savings through a consolidation of head office and warehousing operations and a reduction in finance costs. 

A good Investor presentation for the AGM. No further mention of new acquisitions. If they can maintain the momentum I think this should be in for a re-rate. Waiting for the next couple of 4C to see if the sales of the GO filters in to North America and Asia add significant revenue.

Outlook

We see De.mem well positioned for continued growth in CY 2025, based on the following:

- Recurring revenue profile with approx. 90% of revenues generated by the Company’s recurring revenue segments;

- continued organic growth momentum, with a focus on the cross-sell of high margin products across the Company’s national business portfolio;

- potential access to debt finance to enhance return on equity, based on the positive operating cash flows reported;

- expected contribution from entering the US and Asian markets for domestic water filtration; and

- full year contribution to revenues and margins from the recent acquisitions of Auswater Systems Pty Ltd and Border Pumpworks. 

Latest 4C. Properly cash flow positive quarter. Sorry for not updating the companies I monitor for a while but life has got in the way over the last few months.

KEY HIGHLIGHTS

Quarterly cash receipts of approx. $7.9 million

Cash receipts growth of 20% vs. prior corresponding period (pcp).

Continued double digit organic growth.

Third consecutive quarter of positive quarterly operating cash flows of $303,000. (although after lease costs more like $100K)

Cash balance of approx. $3.7m as of 31 March 2025 (31 December 2024: $3.6m). On track for record CY 2025

Domestic water treatment product launch progressing with new partnership signed for sales of domestic water treatment systems incorporating De.mem’s Graphene Oxide enhanced membrane into China, Indonesia and Japan.

First order received for sales of domestic water treatment systems into China. (only $15K)

Historically, for the calendar years 2022 to 2024, the first quarter of each calendar year generated between 22% and 23% of total annual cash receipts. 

The positive operating cashflow reported for the March Quarter 2025 and full Calendar Year 2024 is an important milestone as it helps to position De.mem to potentially access debt finance for future acquisitions, which would enable a higher return on equity in any potential future acquisitions. 

I emailed investor relations regarding the partnership with Purafy to market a GO filter in North America which seemed to have gone very quiet after the initial announcement.

I had gone to their website which was not displaying products just a broken link when clicking on all products

I sent an email to investor relations regarding Purafy and the lack of any recent BOO contracts and got a prompt reply:

Purafy is marketing the products not to retail/end consumers, but to B2B business partners. This would be developers, construction companies or larger plumbing firms, which buy multiple units at once. Their campaign is in progress and yes, they are marketing the GO enhanced membrane. As they have their own filtration systems, they are only buying the membrane cartridge from us as the key component of the system.

As for our domestic water treatment, as reported, De.mem has presented our own range of systems in the meantime. Our strategy is to build multiple distribution partnerships. The one recently signed for China, Japan and Indonesia is one, the plan is to add further geographies on top of that in the near-term future.

As for BOO projects, we are certainly still offering this model. Given the high interest rates, the pricing for the customer has become more expensive, while the purchase of equipment plus a service contract may be more attractive at this time. Our current growth as reported to the ASX today is largely driven by our “Services” and “Specialty Chemicals” divisions.

So...

Positives

Still growing and improving margins.

Appear to be consistently cash flow +ve with historically higher revenues in the latter part of the year.

SP still sits below my previous valuation.

Concerns

I was anticipating that the GO membrane domestic water product would give decent revenue growth but it seems to be slow.

I think BOO contracts are needed to continue ongoing growth in the Services and Specialty Chemicals area and wonder how much further growth can be achieved without it.

Further acquisitions increasing debt burden.

Conclusion

Although 2 years behind earlier predictions the company does seem to be generating cash flow from recurring revenue with potential for further growth and appears under appreciated by the market.

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. 

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.

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

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.

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.

Highlights:

•  Preliminary adjusted 1Q21 cash receipts +12% above prior corresponding quarter 1Q20
•  Strong second quarter 2Q21 with recurring and contracted (as of today) cash receipts of $4.5 – 5m expected, projecting growth of +33-47% vs. prior corresponding quarter 2Q20 (excluding any additional impact from recent Capic acquisition)
•  Continued growth in recurring cash receipts, to ~67% total
•  Continued growth of subsidiary De.mem-Geutec with 1Q21 cash receipts of ~$1.05m, approx. ~90% above 1Q20 (Geutec)
•  Continued growth of subsidiary De.mem-Pumptech, with 1Q21 cash receipts of ~$0.75m, approx. ~10% above 1Q20 (Pumptech)
•  Continued expansion in Food, Beverages, and Sustainable Agriculture segment.

DISC: I Hold

DEM's Share Purchase Plan closes on Mon 12/4/21...I have topped up

De.mem announces strategic Acqisition in WA

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.

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02353985-6A1024793?access_token=83ff96335c2d45a094df02a206a39ff4

17/3/21

De.mem completes Capital Raising; announces Share Purchase Plan

Highlights:

•  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 (“SPP”) 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.

DISC: I hold & will participate in SPP

De.mem Receives Milestone Order from Australian Energy Sector

New contract

The new ~$550,000 contract is an important milestone because it continues De.mem’s growing momentum in the Australian power generation sector. In September 2020, De.mem announced a $400,000 contract from a customer from the Australian power generation sector (see ASX announcement “De.mem - $400,000 Ultrapure Water Treatment System Order”, dated 29 September 2020).

The customer for the new contract is AGL Energy (ASX: AGL), an Australian listed public company involved in both the generation and retailing of electricity and gas for residential and commercial use. AGL Energy generates energy from power stations that use thermal power, natural gas, wind power, hydroelectricity, solar energy, gas storage and coal seam gas sources.

DISC: I have small holding