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We have tripled down on AJX - Here is our investment plan.


Published 30-JUL-2021 12:50 P.M.


11 minute read

Last week we wrote that we had increased our investment in Alexium International (ASX:AJX), buying shares on the market at around ~5.49c.

After 12 months in quiet execution mode, where the share price drifted sideways, today’s AJX Quarterly CEO commentary promises ‘announcements’ in the near term - in addition to reporting increased revenue and reduced costs compared to this time last year.

We will also share our AJX investment strategy and new company milestones for AJX which we will track closely over the coming months.

We have been invested in AJX for well over 12 months now and invested for the third time after we saw a “change in substantial holder notice” announcing that private equity firm Colinton Capital was buying more AJX shares on market.

Colinton Capital is a well known private equity firm whose specialty and track record is a “hands on” approach to grow the companies they invest in from $100M's market caps to multiple $ Billions by working closely with management and operational teams.

Colinton have been working with the AJX management team for over a year now to help commercialise AJX’s advanced performance chemicals. Our view is that Colinton buying on market is a strong signal they are happy with progress - so we did the same (we also still hold our entire original AJX position from the start of 2020).

Colinton now hold ~12% of AJX.

AJX has developed performance chemicals that have applications for cooling and fire resistance in bedding, clothing, uniforms, upholstery, medical, sporting goods, seating, hats and many other consumer market segments.

AJX continues to increase revenue from its original market in bedding and with Colinton’s help we want to see AJX enter and succeed in the numerous potential new market segments mentioned above.

We are quite excited about our long term position in AJX and believe that the last 12 months of sideways share price movement was due to the complexity of the AJX story combined with AJX and Colinton being in “quiet execution mode” - resulting in a lack of news flow. We believe that the AJX share price will soon catch up to the work that has been done by AJX+Colinton over the last 12 months.

We also note that AJX CEO Bob Brookins sounds equally as excited in this morning’s quarterly report:

For the Alexium team, we are at the most exciting time that I have seen since I joined the Company. While there are a number of factors contributing to this sense of excitement, I believe the greatest driver here is the commercial success we are having across our product platforms”


Fuller updates on these efforts will be provided in upcoming announcements, but as you can see, Alexium has reached a critical stage where our key strategic initiatives are reaching commercial fruition”

Sounds like news flow is on the way from AJX - we will be watching closely, providing our commentary and assessing progress against our AJX investment milestones as AJX emerges from its quiet phase.

The AJX story has evolved but can still be tricky to follow - we spend a lot of time tracking AJX and sometimes find it challenging to reconcile the different AJX chemistry combinations designed to serve different market segments, and how to track the progress being made in each individual market segment.

After multiple discussions with senior management over the last few months we have distilled the AJX story down into the key milestones that WE think are the most important for us to track and comment on from an investment perspective, and are simple enough to us follow over time.


AJX: The simple explanation

AJX has developed and is selling advanced performance chemicals for cooling and fire resistance.

  • Cooling Chemicals → applications for bedding, helmets, textiles, upholstery, sportsware, body armour, work boots etc... you get the idea, anything a human is constantly in contact with that they want to stay cool.
  • Fire Resistance chemicals→ applications for military uniforms, fire-fighter uniforms, bedding, upholstery etc... any material we DON’T want to catch fire.

Sounds simple so far.

But AJX doesn’t directly make the beds, shoes, body-armor, clothes or uniforms etc where their chemicals are used...

They need to sell their advanced chemicals to THE MANUFACTURERs of the beds, shoes, body-armor, clothes or uniforms etc.

In order to commercialise their advanced performance chemicals AJX will partner with and sell their technology to manufacturers in that specific market, who will then on-sell their product to their end customer WITH the AJX chemicals applied.

The manufacturers pay AJX for the chemicals.

Here’s a poorly made infographic that we whipped up on Canva that breaks down this process... the big $ is the stage of the process that AJX makes revenue:

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AJX: how can we follow their progress in each market segment?

Here is an example of the basic process for AJX to generate revenue from a new market:

  1. Identify new market (i.e. bedding, uniforms, body armour, etc...)
  2. Design/Combine AJX chemistries for end use in this new market
  3. Successful testing - confirm the new chemistry combination & manufacturing process works
  4. Sign Manufacturer Partnership #1 - a product manufacturer agrees to use AJX chemistry in their end products
  5. Sign Manufacturer Partnership #2 - second manufacturer proves there is a strong market
  6. First revenue - initial cash generated
  7. Increased Revenue - more cash generated
  8. Multiple end uses in market - develop new uses in the newly established market

Ok, if you are skimming this article make sure you re-read that commercialisation process again...

This commercialisation process is key to how we are going to understand and monitor the progress of our investment as AJX try to enter a few different markets.

For example, to sell its bed cooling chemicals, AJX needs to sign up a bed manufacturer to add the chemical to its beds.

To sell flame retardant chemicals for use in military uniforms, AJX needs to sign up a military uniform manufacturer.

The process is the same for body armour, helmets, shoes, textiles, clothing, sports wear, etc etc.

Let’s say for example AJX decide they want to add their cooling tech to cricket helmets and pads (given how hot cricket players get in summer) they would need to follow the above commercialisation process steps 1 to 8.

This process is how we are going to track AJX’s forays into new markets AND its progress in its existing markets.

AJX is CURRENTLY making progress in the following markets:

  • Cooling for beds
  • Cooling for body armour
  • Flame retardant for beds
  • Flame retardant for military uniforms

And we expect AJX to start identifying new markets and partnering with manufacturers to increase revenue - they have foreshadowed this in their quarterly commentary:

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Here is our summary of the current markets AJX is targeting and how far along our commercialization process they are in each market - we will provide an update each time AJX progresses one of the 8 commercialisation steps:

Cooling Products Market 1: Bedding Market.

Problem: Beds get hot in summer, people who sleep in beds want to stay cool. Air conditioning costs money.

AJX chemicals cool down the bed while the user is sleeping in it.

Commercialisation progress:

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What to watch out for next:

Bedding is AJX’s current stronghold market where they are generating revenue.

We are watching out for any announcements around NEW partner manufacturers or increased revenue from AJX’s existing partner manufacturer Softex

Cooling Product Market 2: Body Armour

Problem: Body armour is heavy and when police/security wear it during duty they get very hot and uncomfortable.

AJX chemicals can cool down the body armour while it is being worn during active duty

AJX says in the quarterly report today that:

“As part of our strategic review, body armor was identified as a target market because of the significant impact of the introduction of EclipsysTM on the product user experience and the meaningful size of the market

Work by the Company in 2H FY2021 has driven this effort forward with successful product design work completed, key test data acquired, and an initial customer in late-stage product qualification. Human studies have been conducted”

Eclipsys is the fancy word that AJX uses for the chemical technology that keeps things cool.

We have ticked off the commercialisation milestones for the body armour market below, with the product testing still ongoing

Commercialisation progress:

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What to watch out for next

We want to see more positive test results in the body armour market segment and confirmation of the first body armour manufacturer to sign up.

Cooling Product Market 3: ???

We expect to see more new markets for AJX’s cooling technology announced and we will be following the commercialisation process:

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Flame Retardant Market 1 : Military uniforms

Problem: Military and first responders are often placed in dangerous situations where they rely on protective support from their uniform - including fire.

AJX chemicals can treat uniforms to be flame retardant

Commercialisation progress:

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What to watch out for next

AJX has been talking about the military uniform market for ages - it's a huge market and which ever vendor gets in will generally stay in for a very long time.

AJX have developed the chemistries and managed to sign up a great manufacturing partner in Pine Belt, but it appears that Pine Belt is taking their time in testing production runs and optimising technical production of AJX’s chemistries BEFORE they add them to their uniforms.

We are (and have been for a while) watching out for any announcements of successful test results or commercial roll out plans from Pine Belt, especially first revenues for AJX.

From the quarterly:

Work on optimization of line conditions and chemistry integration has resulted in successfully achieving extended wash durability and FR performance – the two critical specifications required by the military that the Company has been working to resolve. Work will continue in Q1 FY2022 for optimal design and wearability after which production-scale goods will be provided to the military for testing and evaluation.

Flame Retardant Market 2 : Bedding

Problem: Houses catch fire - untreated mattresses can accelerate house fires.

AJX chemicals prevent mattress fires

Commercialisation progress:

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What to watch out for next:

We are watching out for any announcements around signing up manufactures and generating first revenues

Flame Retardant Market 3: ???

We might see more new markets for AJX to target to be announced and we will follow the commercialisation process once it is announced.

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New Chemistries = New Markets

AJX will provide updates on improvements to existing chemistries and new technologies that they are developing. For the casual investor, it can be difficult to keep track of what each technology does (especially when AJX changes the name every six months) and how each technology ties into AJX’s overall strategy.

What we are paying attention to, when we see an announcement about a new or existing technology, is how it will (A) open up new markets for AJX to commercialise OR (B) improve AJX’s ability to commercialise an existing market.

We are tracking these developments here:

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Bringing it all together from an investment perspective

We have been invested for since early 2020, and AJX has been hitting steady revenues, even as COVID disrupted their partner manufacturers during 2020.

Obviously from a growth and commercialisation perspective we want to see revenue up, costs down eventually hitting cash flow positive.

We compared AJX’s June 2021 quarterly to their June 2020 and conmfirmed that revenues are up and costs are down, which is good.

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We see this quarterly as the baseline to assess all future financials, and that the last 18 months of work will start reflecting in upcoming quarterlies.

Based on the guidance given in this quarterly and past AJX presentations we have set these basic expectations from our investment in AJX over the next few years, we will reassess our expected milestones as the story unfolds.

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Our AJX investment strategy

We have invested in AJX three separate times over the last 18 months and have built our long term position.

Our view is that the current share price doesn’t reflect the value added in the last 12 months so it is starting from a low base.

We plan to hold until AJX can show commercialisation traction across 6 different market segments, at which point we would be surprised if the share price hasn’t re-rated at least 500% - at this point we will look to free carry and take some profit while maintaining a long term position for the next 2+ years.

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Here is our past commentary on AJX

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