I have been researching this one with all my spare time over the weekend including reading all your threads here on HotCopper. Thanks very much for all the insights Pinto! Greatly appreciated, and great to hear how open Nick is to talking to shareholders about the business.
I love the management team, they have skin in the game and passion for product, revenue should be recurring, market diverse, big competitive advantage, etc. etc. And I am now quite heavily invested due to a few purchases from a few weeks age at 70c down to 56c and up to 58c today.. I am a long term investor looking to buy and hold for 3+ years.
My only remaining concern regarding AJX is the valuation, I have no problem accepting they are going to win many great contracts in a great range of markets, but am not convinced that the market is large enough to justify a market cap much in excess of 150m. Pinto, you suggest when US investors are introduced they are likely to want to own 100's of millions of dollars but that cannot be possible in a business with such a small market cap, surely they would instead be trying to acquire the business..
My thoughts stem from reading this report on the marketsandmarkets research on FR market size:
I know very little about valuing a business but this report states: "In 2014, the FR chemical market in Europe and North America for the textiles, flooring and furnishings, and automotive and transportation markets was worth US$1.04 billion, and it is expected to rise to US$1.34 billion by 2019."
That's Alexium's target market right? It's worth around US$1bil, so Alexium at US$116mil current market cap is already 11.6% of the size of their target market before they are even making a profit. The global market value for Alexium's 3 target markets was US$2.5bil but that includes the biggest - Asia - where they don't have strict laws already enforced or being enforced on FR products. Talking through this myself it doesn't sound too bad, points that would ease my concern include:
1. By making FR more affordable AJX can potentially increase the available market as it becomes feasible to use FR on more things (included in expanding market?)
2. FR regulations in US and EU may increase market as it becomes evident existing infrastructure etc contains hazardous chemicals (is this influence also included i the increasing market size over coming years?)
3. Asia will might begin to increase regulation around FR?
4. Alexium is targeting (with less focus/urgency) other FR markets and also non-FR markets such as cold weather, etc.
Just thought I'd put this out there though, anyone else care to share their thought on market cap potential? This is after all what should determine the share price in long term as far as I am aware.
Cheers,
Lastly, this is my first post on Hot Copper, signed up on Friday. Was surprised to see how willing people are to share their research, it makes for a great, supportive, helpful community. At the same time I have seen a fair bit of trash talk crucifying people over differing opinions. So everyone please welcome negative comments, we want to know about any short falls as well as positives, if we all just boast about the pros and not the cons we will never see the big risks coming.
I'll finish with this for other long termers:
In the short term the market is a voting machine, in the long term it is a weighing machine - Warren Buffet (sorry if I've misquoted off top of my head) but making money investing to me is a marathon not a 100m sprint, and who cares what the SP does in short term, the market rarely has an accurate consensus on the health of a business, so it's up to us to ignore SP fluctuation, consider the business & management, make the market our servant and make good use of volatility. If I was ever to trade short term it would be based on random SP dips on the back of no news with only great businesses with good track record and long term prospects.
GLTAH
Foolishly, Harry.
AJX Price at posting:
57.0¢ Sentiment: Buy Disclosure: Held
(20min delay)