Newing is back in!, page-4

Graeme Newing is the only analyst currently reporting on AEI.  

"I bought back into Aeris Environmental (AEI, 58¢ up 5.5¢, $141m, daily hourly) at an average of 55.9¢. I had sold the previous holding at 62.5¢ on 3 June", Newing says.

"The stock has broken its downtrend and I am hoping it will now form a new uptrend. I have updated my internal note and frankly do not understand why this coronavirus stock is so cheap."

Here's Newing's updated research note:

Aeris Environmental Ltd(AEI)
1 July 2020
Price 58¢
Shares 242.5 mill
Mkt cap $141m
Based in
Rosebery, Sydney NSW 2018
What it does
AEI is focussed on environmental hygiene, including surfaces, skin, air quality, food safety and energy efficiency. It’s disruptive technology was developed after decades of research in collaboration with leading institutions such as CSIRO and UNSW. The products use a non-toxic environmentally-friendly polymer biocide disinfectant which forms a <1 micron invisible film over surfaces, giving viricidal, bactericidal and fugicidal protection lasting up to 7 days or 200 touches. They also prevent corrosion, mould and odours. And yes, they are effective against coronavirus.
Potential
Each segment is a multi-billion dollar opportunity, which in aggregate is over $90b and growing at over 8% annually.
Distributor network drives scalable business model.
Rapidly growing global footprint.
Strong repeat revenue, akin to annuity growth.
Gross margin approaching 50%.
Operating expenses projected at $6m annually.
Financial
The March quarter saw maiden cash from operations at $1.1m after customer receipts of $4.0m. The quarter closed with cash of $3.0m and no debt.
The company undertook a $12m placement at 43¢ in April 2020 to accelerate growth.
Profitability
Sales revenue likely to exceed $13m in FY20 (June year) up 90%, because the first 9 months revenue was $7.3m and that booked for April alone was $4.0m.
Accelerating growth is expected in FY21.
So assuming FY21 revenue is $24m, gross profit $12, pretax profit would be $6m.
And assuming FY22 revenue is $40m, gross profit $20m, pretax profit would be $14m.
Recent announcements
On 19 May Aeris signed a strategic alliance with a couple of leading Chinese businesses (Taitrust and Shanxi) to broaden its presence in the Chinese market. These entities have committed to purchase RMB20m (about A$4.2m) of goods from Aeris for the first year.
On 5 June Aeris gave an update on its North American business potential. A fast-track application for key products has been lodged with the Environmental Protection Agency in the USA, and approval is expected in July. In addition, manufacturing trials have been successful in a large volume facility with a capacity several times larger than the company’s combined manufacturing capacity on Australia.
People
Key directors are:

• Maurie Stang (Chairman) with 23.9m shares (9.9%).
• Bernard Stang (his brother) with 20.3m shares (8.4%).

They have many business and health care interests, the main one being the Regional Health Care Group of companies and Novapharm Research. Both are also major shareholders of Nanosonics, of which Maurie is still chairman, while Bernard is a director of Weizmann Australia.
Other directors comprise:

• Steven Kritzler (MSc from UNSW in polymer chemistry, technical director of Novapharm Research). He owns 8.3m shares (3.4%).
• Michael Ford with 75,000 shares. He is the current CFO of News Corp Australia. He was appointed a non-executive director of AEI in April following a vacancy and straightaway bought his 75,000 shares at 62.2¢.
• Peter Bush, an accountant, is CEO and CFO and alternate director to the Stangs, and owns 2.1m shares. He is also CFO of the Regional Health Care Group of companies.

Robert Waring is company secretary and owns 1.0m shares, while Michael Kotowicz handles investor relations.
Other shareholders include:

• Laurence Freedman owns 15.7m shares (6.5%) through his Link Group. He has been a shareholder for many years.
• On 1 May Perennial Value Management Ltd popped up as a substantial shareholder with 12.6 million shares (5.2%). On 11 June it lodged another substantial shareholder notice, disclosing that its holding had increased to 15.2 million shares (6.3%).