De.Mem (ASX: DEM) – global turn-key wastewater treatment
COMPANY SCOREBOARD
| Pro Plus | Pro | Con Plus | Con |
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ABOUT COMPANY
De.mem (DEM) (https://demembranes.com/) offers “one-stop-shop” water treatment products and services to industrial customers – ranging from the supply of different types of water treatment equipment, chemicals, pumps and hydraulic components, membranes, filters and consumables to the provision of Build, Own, Operate (“BOO”) and operations & maintenance services related to water treatment facilities. It operates in the mining & resources, municipal & infrastructure, food & beverage and other industrial segments.
The company’s core product lines are membrane–based water treatment plants, based on a proprietary intellectual property portfolio of innovative membrane technologies developed and manufactured in Singapore’s Nanyang Technological University (NTU). These include a revolutionary low-pressure hollow fibre nanofiltration membrane and a hollow fibre forward osmosis membrane for de-watering or liquids concentration.
In July 2019, the company acquired a Tasmanian water and waste water treatment systems business Pumptech Tasmania Pty Ltd for $1.05m. Pumptech reported unaudited revenues for the 12 months ended 30 June 2019 of approx. AUD$2.5 million, and a normalised EBITDA of approx. A$200,000. The transaction is valued at approx. 5x normalized EBITDA.
In October 2019, the company acquired a 75% stake in industrial waste water treatment company Geutec GmbH based in Essen, Germany, for A$915,000 in cash, or ~ 5x normalized earnings before tax. In October 2022, the company acquired the remaining 25% share for $345k.
In March 2021, the company acquired a Perth-based specialty chemicals supplier, Capic, for a base consideration of $4.4m plus $750k future potential milestone payments. Capic generated a stable revenues of ~A$3.3m (3–yr average) with EBITDA of ~$600k.
In March 2022, the company acquired a Victoria-based small water treatment business, Stevco, for a total consideration of $1.5m mix of cash and share plus potential milestone payments. Stevco generated $2.3m in annual revenues over the past three years. The deal values Sevco at 4.5x EBITDA.
The company spent around $10m to date on acquisitions.
CAPITAL STRUCTURE
| ASX Code | Share Price | Shares | Option (In) | Market Cap | Cash/Asset ($m) |
| DEM | 0.13 | 269750817 | 35067606.21 | 4.4/8.3 |
| Holders No | Top 20 (Cur) | Top 20 (Pre) | Director Hold | Performance Right | Note |
| 1235 | 72.29% | 70.51% | 1.98% | 1010000 | last raise $2.2m@9c; pre raise $3m@14c |
BUSINESS
Below is the company’s past five years performance
| DEM | 2022 | 2021 | 2020 | 2019 | 2018 |
| Operation Revenue | 19644 | 18078 | 14159 | 10126 | |
| Cost of Sale | -12840 | -11988 | -9830 | -7544 | |
| Gross Revenue | 6804 | 6090 | 4329 | 2582 | 0 |
| Gross Margin | 0.3464 | 0.3369 | 0.3057 | 0.2550 | 0 |
| Overheads | -8678 | -8944 | -8063 | -5875 | |
| Fixed Overheads | |||||
| Variable Overheads | |||||
| Total Operation Expense | -8678 | -8944 | -8063 | -5875 | 0 |
| Operation Profit | -1874 | -2854 | -3734 | -3293 | 0 |
| Other Revenue | 350 | 42 | 910 | 108 | |
| Interest Expense | -75 | -149 | -65 | -59 | |
| D&A | -1613 | -1264 | -646 | -260 | |
| Income Tax | -43 | -78 | -4 | -13 | |
| Net Profit | -3255 | -4303 | -3539 | -3517 | 0 |
| NOTES |
The company estimates that EBITDA break-even is expected to occur at approx. $26m in revenues which is anticipated in FY23. It forecasts to produce $16.5m-$19m ARR.
SUMMARY
The company perhaps has some degree of pricing power.