Ann: Alexium Total Mattress Cooling System (TMCS) - Details, page-37

I’d normally value a business on the P/E ratio which you can’t do here as they are not making a profit … other companies you may base on assets … but AJX is not that type of business … a multiple of revenue is sometimes used in buyouts but I’m not sure what an appropriate multiple would be used here either. We are heading towards 4 times revenue at the moment, perhaps that’s a little high but perhaps not.
But many more companies that aren’t making a profit listed on the ASX are based on speculation and I guess a measure of hype at any given point of time or really just how many buyers and sellers they are at a given point of time.

For me I’m looking at a 3 to 4 year period, so at its potential, funnily enough I probably would have said that 4 years ago too. However I feel we have turned a corner and for me that really occurred back mid last year. I had pretty much sold out but the quarterlies started showing progress, not just in words used but numbers. And I think the rising receipts over several quarters has reassured me. That was the real show of progress, strengthening revenue, companies can talk all they want but really let’s see the money … which is slowly happening.

I think they are going to need some big percentage increases on revenue for the next few years which I wasn’t sure they could do, but the recent half year surprised me, with what a 50% increase on the previous year … but they need to maintain that.

Eclipsys could be a game changer but it’s too early to really tell and a part of its success will be how well the Alexium team can sell it. I think if we can market it as a brand name and have it branded on the products we sell that will be a big advantage … aka GoreTex … Premier are using it let’s hope others that sign do too.

One negative is the likely slow uptake of new clients due to testing requirements… new customers and those looking to use our chemistry in new products will need to test our chemistry and this will take time. So far no other body armour suppliers have signed … I bet that most are looking at it but heck they may need 6 to 12 months of design and testing first. We have seen how long FR sock is taking and the military.

On a positive if they can lock their financing loan in that will limit any need for a cash raising, and cashflow positively I can see in the coming few quarters.

I think if they can do 40m in revenue in 4 years at a 40% margin we should achieve a good market cap.

Sorry not really answering your question but AJX remains a solid hold and accumulate on weakness for me for the potential that is finally being seen but which will also need to continue to be seen.