With yet another ‘Super Tuesday’ behind us, and the seemingly unstoppable Trump continuing the run for America’s top office it seems timely to continue our ASX:Trump series. We started with NASDAQ:SWHC which has since soared 9% and ASX:BLD, or Boral as the tradies call it closing up 5% since this article. Today we are looking at a company, which is essentially a start-up. That’s right you spec lovers, listen up.
The rationale today is of course a Trump presidency would cause absolute chaos, and there will be significant demand for military supplies. The prospect of this chaos alone could well push up the price of this stock, and those listed above.
Alexium International is listed on the ASX, but is based out of the US. Alexium (ASX:AJX) develop chemicals, which the primary product being fire retardant. The company doesn’t boast huge sales just yet, but offer investors a piece of 20 patents in 9 countries, which cover products like environmentally friendly fire retardant.
Where does the military fit into all this?
One of AJX’s key product lines, and market opportunities is military uniform. In the USA where AJX are based the military are a customer, and partner in the development of this technology. AJX claim to lead the industry in the environmentally friendly race, but perhaps more commercially appealing to a government organisation is the cost advantage. AJX can last up to 50 washes while being effective in protecting the wearers of the uniform.
While it is speculative, a government led by Trump may require many more ‘boots on the ground’, which will come equipped with uniforms, which could very well be protected by AJX. The market size in the USA alone is put at nearly a quarter of a billion dollars. Then take a look at all the other militaries, and you see the market opportunity rivals even the best baby formula producers.
Now it is not all military uniforms. In fact AJX put the total market size for its products at over US $10bn by 2020. AJX are going after other work forces (think mining industry, construction and hospitality), bedding, curtains, cars and other transport. The broader application for this product is huge, and the sales are only just beginning.
But wait there’s more. Perhaps the most lucrative application for this patented technology comes about with plastic. This could include those hover boards that were blowing up around Christmas, or even wires which utilize plastic coatings. Every day electronics and appliances that stand to benefit from improved fire retardant protection. A few big contracts with the big end of town here could really set the stock price firing.
And that leads into the basic financials. The market capitalisation is sitting at just below $200m. The company is yet to achieve break even returns, however has forecasted to do so before the close of 2016 (calendar year). AJX is boasting exponential (their word, not mine) sales growth that is expected to return the companies first profit in the coming 18 months. But if you are looking at dividends, you best look elsewhere, these guys are very much still in growth mode.
Earlier this week the group announced 18 new customers flagging the above mentioned growth. Surprisingly this announcement came after the share price grew 35% in 14 days. In fact since the announcement AJX has fallen 4%. But the long term outlook for AJX looks good, if they can continue landing more customers and leverage the military expertise, the break-even will come sooner rather than later.
This is a stock I own, and intend to for some time. If you are interested in receiving more articles on stocks I own or find interesting, subscribe below. If you want to read more of the ASX:Trump analysis, then click here.