De.mem Ltd (ASX: DEM) PLACEMENT **** - $2.2m at 9 cents per share - Wholesale Placement Fully Subscribed - (Equities Research and Terms Sheet attached) De.mem Limited (ASX: DEM) is undertaking a Wholesale Placement to raise from $2.2m at 9 cents per share. Wholesale Placement Fully Subscribed The Wholesale Placement is almost fully subscribed by existing investors and the Board, as follows: Combined, both the Chairman and Non-executive Director, Mr Harry De Wit, have committed to invest $550k. Perennial Value Management will invest on a full pro-rata basis, consistent with their existing ~14.9% holding. NorthStar Impact Funds will add to their existing investment. Oversubscriptions at Board absolute discretion. ThisOffer is not underwritten and is only open to investors who qualify under s708 of the Corporations Act 2001. About DEM De.mem Limited (ASXEM) provides on-site, bespoke industrial water treatment solutions, with ongoing services, chemicals, pumps and consumables to generate recurring revenues. DEM has a strong growth outlook, underpinned by ~91% recurring cash receipts, with imminent entry into the global US$82 billion domestic filtered water market. Strong balance sheet – Post capital raising, proforma cash on balance sheet of ~$4.6m (31 Dec 23 cash balance of ~$2.4m). ~$25m CY23 cash receipts, of which 91% recurring cash receipts. Discounted relative valuation, with multiple near-term re-rating catalysts. Operating near cashflow positive Record CY23 results – cash receipts, margins, 19 quarters successive growth vs pcp Strong growth outlook, underpinned by ~91% recurring cash receipts and first revenues from entry into USA domestic water filtration market provide outlook for proforma cash positive ESG/ethical investment opportunity. Competitive advantage of proprietary membrane technology. Corporate potential. KEY INVESTMENT HIGHLIGHTS Record results Record ~91% recurring cash receipts - $22.5m in CY23 ~91% of total Record annual CY23 cash receipts ~$25m (up 8%) Record quarterly cash receipts –December Quarter 2024 cash receipts $7.1m Record growth momentum - 19 successive quarters of cash receipts growth vs. prior corresponding period Record margins - gross margins up from 19% to 37% (CY18 to H1 CY23) Discounted relative valuation, transformational CY23 with record results, recordoutlook Trading at ~$24m market cap, ~0.9x revenue, discount relative to global comparables: 53% discount to global comparable acquisitions of1.9x 83% discount to global trading multiples of 5.3x Multiple Re-rating catalysts Operating cashflow positive New growth market entry Value-adding acquisitions New products in new markets. Corporate activity Strong Growth Momentum and Outlook, with 19 Successive Quarters of GrowthHighest quarterly cash receipts ever recorded in December Quarter 2023 ($7.1m) Operating near cash flow positivePositive operating cash flow in Dec Qtr 2022 (+$203k) & March Qtr 23 (+$19k) Operating cash outflow in the Dec Qtr 2023 (-289k) Adjusted proforma CY23 operating cash loss of A$0.6m Annual CY23 cash operating loss reduced to A$1.5m (vs $1.9m CY22) Excluding outstanding final payments from two projects of ~900k Intended expansion into global domesticwater filtration market (US$24.1bn estimated size in 2025 *), with expected base revenues of $300k in Year 1 and $750k in Year 2 (*Source: Grand View Research, Home Water Filtration Market Unit Market Size, 9 July 2019) Blue ChipCustomersTechnology and business model validated by repeat orders from global, blue-chip corporates Substantial growth opportunity via land & expand and cross sell opportunities. Clients include Rio Tinto, AGL, Coca Cola, Alcoa, Inghams, Treasury Wine Estate Favourable Market Dynamics – Highly Fragmented, Large Addressable MarketDomestic addressable market A$2.3bn; global market expected to reach US$39bn by 2026. First commercialisation of domestic water purification application, applying unique Graphene Oxide technology, targeting US$82.6 billion market. First revenues of $50k announced 8 Feb 2024. Strong Value Add Track RecordStrong acquisition value-add track record, with average 63% revenue growth by De.mem across 4 acquisitions Corporate Potential (both target and acquirer)Fragmented sector, with niche competitors with limited technical, financial and organisational capabilities Global consolidation, with several large listed players Technology Driven Competitive Advantage & Customer Value PropositionProprietary portfolio of hollow fibremembranes deployed as the key component in the company’s systems One stop shop to meet complete customer needs, enabling significant cross-sell Strong Growth Outlook High cash receipts visibility, with ~91% recurring cash receipts, underpins growth outlook Deferred contract payments (~$900k) and additional orders (~$1m) add to growth outlook New market entry: global US$82.6billion market, with first revenues of $50k and expected over ~$1m revenue over next 2 years; and further upside from new products and markets TRANSACTION SUMMARYOffer Details Transaction PlacementSole Lead Manager BLETCHLEY Park CapitalIssue Price (A$) $0.09Amount to be raised (A$) $2.2m Pricing Summary The Offer is priced at 9 cents per share (cps) which is: ~10% discount to 10.1cps 30-day VWAP. ~6% discount to last close of 9.6 cps (16 Feb 2024).
DEM Price at posting:
9.6¢ Sentiment: None Disclosure: Held
EM) provides on-site, bespoke industrial water treatment solutions, with ongoing services, chemicals, pumps and consumables to generate recurring revenues. DEM has a strong growth outlook, underpinned by ~91% recurring cash receipts, with imminent entry into the global US$82 billion domestic filtered water market. Strong balance sheet – Post capital raising, proforma cash on balance sheet of ~$4.6m (31 Dec 23 cash balance of ~$2.4m). ~$25m CY23 cash receipts, of which 91% recurring cash receipts. Discounted relative valuation, with multiple near-term re-rating catalysts. Operating near cashflow positive Record CY23 results – cash receipts, margins, 19 quarters successive growth vs pcp Strong growth outlook, underpinned by ~91% recurring cash receipts and first revenues from entry into USA domestic water filtration market provide outlook for proforma cash positive ESG/ethical investment opportunity. Competitive advantage of proprietary membrane technology. Corporate potential. KEY INVESTMENT HIGHLIGHTS Record results Record ~91% recurring cash receipts - $22.5m in CY23 ~91% of total Record annual CY23 cash receipts ~$25m (up 8%) Record quarterly cash receipts –December Quarter 2024 cash receipts $7.1m Record growth momentum - 19 successive quarters of cash receipts growth vs. prior corresponding period Record margins - gross margins up from 19% to 37% (CY18 to H1 CY23) Discounted relative valuation, transformational CY23 with record results, recordoutlook Trading at ~$24m market cap, ~0.9x revenue, discount relative to global comparables: 53% discount to global comparable acquisitions of1.9x 83% discount to global trading multiples of 5.3x Multiple Re-rating catalysts Operating cashflow positive New growth market entry Value-adding acquisitions New products in new markets. Corporate activity Strong Growth Momentum and Outlook, with 19 Successive Quarters of GrowthHighest quarterly cash receipts ever recorded in December Quarter 2023 ($7.1m) Operating near cash flow positivePositive operating cash flow in Dec Qtr 2022 (+$203k) & March Qtr 23 (+$19k) Operating cash outflow in the Dec Qtr 2023 (-289k) Adjusted proforma CY23 operating cash loss of A$0.6m Annual CY23 cash operating loss reduced to A$1.5m (vs $1.9m CY22) Excluding outstanding final payments from two projects of ~900k Intended expansion into global domesticwater filtration market (US$24.1bn estimated size in 2025 *), with expected base revenues of $300k in Year 1 and $750k in Year 2 (*Source: Grand View Research, Home Water Filtration Market Unit Market Size, 9 July 2019) Blue ChipCustomersTechnology and business model validated by repeat orders from global, blue-chip corporates Substantial growth opportunity via land & expand and cross sell opportunities. Clients include Rio Tinto, AGL, Coca Cola, Alcoa, Inghams, Treasury Wine Estate Favourable Market Dynamics – Highly Fragmented, Large Addressable MarketDomestic addressable market A$2.3bn; global market expected to reach US$39bn by 2026. First commercialisation of domestic water purification application, applying unique Graphene Oxide technology, targeting US$82.6 billion market. First revenues of $50k announced 8 Feb 2024. Strong Value Add Track RecordStrong acquisition value-add track record, with average 63% revenue growth by De.mem across 4 acquisitions Corporate Potential (both target and acquirer)Fragmented sector, with niche competitors with limited technical, financial and organisational capabilities Global consolidation, with several large listed players Technology Driven Competitive Advantage & Customer Value PropositionProprietary portfolio of hollow fibremembranes deployed as the key component in the company’s systems One stop shop to meet complete customer needs, enabling significant cross-sell Strong Growth Outlook High cash receipts visibility, with ~91% recurring cash receipts, underpins growth outlook Deferred contract payments (~$900k) and additional orders (~$1m) add to growth outlook New market entry: global US$82.6billion market, with first revenues of $50k and expected over ~$1m revenue over next 2 years; and further upside from new products and markets TRANSACTION SUMMARYOffer Details Transaction PlacementSole Lead Manager BLETCHLEY Park CapitalIssue Price (A$) $0.09Amount to be raised (A$) $2.2m Pricing Summary The Offer is priced at 9 cents per share (cps) which is: ~10% discount to 10.1cps 30-day VWAP. ~6% discount to last close of 9.6 cps (16 Feb 2024).
