FYI Petra Notes issued today: Alexium International (AJX) -...

FYI
Petra Notes issued today:
Alexium International (AJX) - Beating the house in Las Vegas


Alexium have had another well received and commercially successful trip to the semi-annual Las Vegas market textile show (28 Jan – 1 Feb). As per our recent discussions with management on-the-ground (VP of sales), several Alexium chemistries were contained on bedding products, on different stands around the show. Interest levels towards these customers/manufacturers were excellent, and remained high for 3 days. There was a solid mix of US (60%) and international (40%) manufacturers present. Although not specifically marketed as “Alexium” chemistry, sales staff of the different brands were trained in the features, and seen to promote the cooling effects for foam mattresses, inner spring mattresses and pillows. One particular mattress manufacturer, who had previously undertaken some small preliminary testing with AJX products (in H118) were so impressed they have already placed a sample order, and have moved to expedite the (usual) 6-12m timeframe for trials, to potentially have these on their bedding product line by May ’18 (Spring selling season). We remind that in H217, sales volumes following this textile show improved +700%. In addition, a recently (1/1) appointed industry specialist is actively providing AJX additional mattress industry inroads. We believe the market will continue to focus on delivery against key KPI’s in (1) bedding (2) military and (3) Alexiflam NF, however positioning now can capture significant potential upside, in our view. Buy maintained, >100% upside to our $0.80 target price.
Why BUY now?

• Specialty chemistry sales have shown a remarkable rebound in January, with the company shipping their 3^rd highest ever volume of chemistry in what is a traditionally quieter month (winter). This puts Jan ’18 sales at c6x the volume of sales from Jan-17.

• H118 we believe was the darkness before the dawn. With low quality sales now removed from the mix, GP margins, cash flows and profitability should improve markedly from this point. Sales volumes are rebounding as expected and sales should lift considerably from this point.

• Following discussions with Management, we retain our confidence in FY18/19 revenue forecasts. Although there is still work to do in H218, the rebound from late 2017 is clearly strong and very real.

• We wait for contract updates on (1) bedding (2) Military and (3) Alexiflam NF. Any of these would be a very strong share price catalyst, in our view.