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This is an email sent to a retail shareholder in Alexium recently. The email has been shared around the internet and has been cleared by management for release to any interested parties.
From: Gavin Rezos [mailto:[email protected]]
Sent: Monday, 5 September 2016 6:12 PM
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Dear _____________
Thank you for your email. I completely share your frustration with the share price performance which does not reflect the operational and sales advances made by Alexium. We value the support of our retail shareholders and fully understand their frustration with the share price as well.
You will have seen that Nick and I have recently purchased over $170,000 of AJX shares given the shares are very cheap. We had to wait until after lodgement of the 4E before being allowed to make the recent on market purchases.
It is also important that the recent ASX S&P 300 rebalancing did not impact Alexium despite the share price (and therefore market cap reduction) as I expect S&P see this fall as temporary.
The factors impacting the share price and what we are doing to address those factors and have the share price turn around strongly are as follows:
1. Factors Impacting:
a. Lack of an Australian Retail Broking House appointed to highlight Alexium to the retail sector;
We did not immediately replace Baker Young as retail broker and that is something we should have addressed earlier. Strong announcements were not being picked up by new retail clients of other brokers but simply by our existing shareholders and insto’s.
b. Institutional Broker as sole coverage;
Institutional brokers contact their clients and issue research updates only on material news as opposed to much more regular contact that occurs between retail brokers and their clients. We have a number of institutional holders who have taken a position with a view to significantly increasing that position when we meet our revenue projections. Fidelity, one of the world’s largest funds has expressly stated that position to us. That means we need to expand our Insto base more widely pending the additional buying on achieving our numbers.
Moelis have a $1.20 price target.
c. Rebalancing of one Insto portfolios form small cap to mid cap;
There has been one insto ( out of 6+) in the last placement that is moving out of small caps to mid caps and this has been a gradual process.
d. Market needs to understand the timing on progress on revenue projection;
I believe the market did not fully understand that the $18m revenue guidance for calendar 2016 was not based on equal quarterly increases but rather much larger September and December quarters and marked us down for the lower revenue in the June quarter where expenses were also much higher due to buying of inventory to fulfil the growing orders in the September and December quarters.
e. Lack of an Australian based Investor Relations resource;
It is evident that we need at least a part time resource on the ground in Sydney or Melbourne given our US base and my London base.
f. Slower traction in the US Investor Market
We have a highly regarded New York based investment bank ready to go but they have advised we need to wait for the right market timing. We have a number of US HNWI potential buyers reviewing the company and they often take a longer time on buying decisions.
g. Step Change Catalysts taking longer
In addition to the contracts announced and our revenue guidance there are a number of step change catalyst in the wings. These include additional revenue contracts in new areas, US DoD sourced orders as stock piles of the old FR uniforms are depleted and our new FR uniforms can be ordered as field trials are completed, widening of the FR Uniform base to all US DoD personnel, NATO country orders, large scale multinational distribution/licence agreements etc.
2. Actions to Address:
a. We are actively looking to engage an East Coast retail brokerage house that follows ASX 300 companies with earnings growth businesses. This will have an immediate impact with research to complement the Moelis research.
In addition, I will be presenting to new European investors in the last week of this month in a roadshow initially covering Frankfurt, Munich and Zurich.
b. We will be presenting at the ASX Spotlight series in Hong Kong and Singapore in the third week of October and I will be seeing Hong Kong and Singapore institutional investors as a means of widening the insto base outside Australia.
We also have US initiatives as described below.
c. This one off insto rebalancing should be practically finished. It is not a reflection on Alexium as it affected all their small caps;
d. We have been getting out the guidance message to our insto’s shareholders through Moelis but we will get the message out to the retail market through the new retail broker once appointed. We have also expanded the information and presentation of that information in our recent quarterly and preliminary full year reporting to help get that message across.
e. We are actively seeking to engage a part time analyst/IR person who will be most likely based in Sydney to maintain regular contact with investors and broaden the IR base, broker coverage and media coverage in Australia. Kevin Kye, our part time Co Sec is also based in Sydney.
Nick and I will be both be that AGM in November and Nick will be doing an Australian based roadshow then. I will be seeing Australian investors in late October.
f. We are appointing a NY fund manager (an Australian who has been in broking and funds management for 25 years and who previously introduced a New York fund onto the register) to move onto a part time role in New York to widen the US investor base.
Nick has also progressed presentations with US Family Office Groups through a family office specialist in New York.
We have also appointed a prominent and very successful IR/PR firm in New York whose CEO has a very high regard for Alexium and knows Nick and I well.
g. Once any of these step change contracts is signed, I expect the news will ignite the share price as showing the potential revenues in 2017. All the work we are doing on the IR side will help broaden the impact of the step change contracts.
Finally, we will also be in our new dedicated building in October with an official opening to be attended by a prominent US legislator which will also help awareness in the US media and markets.
Please share my comments above with your group and thank them for their support on our behalf. We intend to have our shareholders rewarded with new share price highs as we move into 2017 having met or exceeded our revenue projections and laid a firm foundation for profitability in 2017.
Kind Regards,
cid:[email protected]
1100 New York Avenue, Suite 710W
Washington, DC 20005 USA
www.AlexiumInternational.com
Gavin Rezos
Executive Chairman
[email protected]