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Water tech: De.mem says it’s making actual money, stock rises 23pc

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Water company De.mem (ASX:DEM) says it’s made $150,000 from licensing its high tech filtering membrane for the last year.

And among generally unloved water stocks, that news has caught everyone’s attention.

  • Scroll down for more news on unloved water stocks coming good>>>

The stock rose 23 per cent to 13.5c on the back of that. The struggling share price has been a bugbear for CEO Andreas Kroell for some time.

Market releases suggest the company sold $30,000 worth of filters in April last year to two customers in Singapore and Vietnam, and made another sale in February for an undisclosed price to an anonymous Singaporean customer in February.

The ‘forward osmosis’ technology is a membrane used at the end of water treatment, where liquid is passed through a membrane which allows only water molecules to pass through. It is licensed from Singapore’s Nanyang Technological University (NTU).

The company is looking at using it in both waste food and the food sector.

De.mem was set up to commercialise the membrane, but in September 2017 bought an Australian business named Akwa-Worx, which provides water treatment plants to government and mining customers such as Rio Tinto (ASX:RIO).

Akwa-Worx provides most of the company’s income. For the 2018 calendar year, revenue jumped 259 per cent to $10.5m thanks to the Australian business, as De.mem sought out initial customers for the membrane.

It also helped slash the full year loss to $2m from $6.3m, but is not quite covering all of the company’s expenses; De.mem reported a cash burn of $600,000 in the last quarter.

Kroell told Stockhead the commercial ramp up now will be in Singapore and Australia — countries where they have a presence.

“Singapore has a lot of factories from ie. manufacturing sectors, oil and gas, chemicals, which require waste water treatment. Also, a lot of potential customers from the food and beverage industry, i.e. flavours and fragrances sector, have a presence in Singapore,” he said via email.

“Australia has large scale food and beverage/agricultural production, i.e in South Australia where De.mem recently opened an office in Adelaide.”

More news on unloved water stocks:

Bioplastics maker Secos (ASX:SES) is also on investors’ noses, but today scored $500,000 from Melbourne fund manager Armytage Private, owned by regular Stockhead commentator Lee Iafrate.

Secos has been winding down a revenue-generating but declining traditional plastics business and setting up a new bio-plastics operation in Malaysia. Secos shares have also been winding down since a peak in January 2018 when the full impact of China’s ban on Australian recycling exports became apparent, despite being preceded by two years of warnings, and plastic bag bans began to be publicly mulled.

Chairman Richard Tegoni has repeatedly told Stockhead over the last 18 months they can see the demand for bioplastics but the transition is taking time as customers test and rejig their own facilities to handle it.

As such, the money is also taking time to come in, although the March quarterly report indicated bioplastics sales have almost caught up with traditional plastics sales. It will need to double to fully replace the traditional business and get growth going.

Iafrate told Stockhead the risks to the business are now “fully quantified”, it’s almost cash flow positive and making strong revenues.

He said he “could not find another company with such a brilliant market thematic”.

Categories: Tech

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