De.mem water treatment deals fail to make a splash with investors
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Despite a company-transforming acquisition and $300,000 in new contracts, investors have not rewarded water treatment stock De.mem.
Its shares remained flat at 34c on Wednesday despite announcing the new sales contracts.
However chief executive Andreas Kroell, speaking from Saigon, was stoic.
“I’m a little surprised too,” he told Stockhead. “But sooner or later the share price should move.”
De.mem (ASX:DEM) has the exclusive licence to a water purifying membrane from the Nanyang Technological University in Singapore, a technology that is exciting analysts, if not yet investors.
The company listed in April at 20c. After an initial surge to 45c, this month it’s traded between 30c and 34c.
This month De.mem transformed itself from a small company selling water treatment equipment in Vietnam and Singapore, with revenue of just under $300,000, to one with revenues topping $7 million.
On Wednesday its new acquisition, Queensland-based water treatment company Akwa-Worx, was awarded four new contracts that start immediately.
Mr Kroell won’t forecast what those extra contracts will do for the bottom line, but he does have plans for the $2 million purchase.
“What we find quite interesting in Australia is the potential for water recycling,” he told Stockhead, particularly in the agriculture sector.
“And here the water quality is good, which means that it could meet recycling standards for reuse [as drinking water].”
The “ultimate goal” though, is China.
Mr Kroell says Asia as a whole is a growth market for water treatment because governments across the region are tightening industrial water discharge regulations.
China itself launched a new law in December last year which instituted an environmental protection tax on polluters.
In Saigon, where “old De.mem” got its start, they mostly deal with water treatment systems because of the high number of people needing drinking water. The shift to more complex industrial wastewater is a big part of why the company bought Akwa-Worx.
That deal is expected to lift the company’s asset base by 76 per cent to $10 million and provide the size with which the company can make its way into China.
Mr Kroell says talks are underway to find the right partner for that move.