Growth Areas for Materials Sector Stocks - CG1, SDV, HZR & AJX

  • Oct 29, 2019 AEDT
  • Team Kalkine
Growth Areas for Materials Sector Stocks - CG1, SDV, HZR & AJX

Materials sector includes a number of industries that include chemicals, construction materials, containers & packaging, metals & mining, and paper & forest products. It includes the companies that produce commodity chemicals, fertilizers, industrial gases, metal & glass containers, paper & packaging, commodity exploration, and forest products.

In this article, we would discuss four such stocks from the materials sector that are not engaged in the metals & mining industry.

Carbonxt Group Ltd (ASX: CG1)
Contract

On 28 October 2019, the company announced the finalisation of industrial pellets contract. Accordingly, the company has executed a letter of intent (LOI) with Purafil, Inc – a US-based company focused on air purification.

Further, the company has penned the contract for a period of three years with an estimated value of $3.2 million in purchases along with a minimum purchase of $1.4 million per annum.

In addition, the company signed two new contracts for Powdered Activated Carbon and Activated Carbon Pellets, equating to an additional $0.6 million per annum.

It was said that the pipeline is growing, and various important opportunities are progressing with trial phase, particularly in the Activated Carbon Pellets segment. Also, the company is positively progressing towards its commitment to become cash flow positive in FY20.

Securities of Carbonxt Group were placed on a trading halt on 28 October 2019, pending an announcement related to capital raising. CG1 stock last traded on 25 October 2019, at a price of $0.415.

SciDev Ltd (ASX: SDV)
Acquisition

Recently, the company entered into binding Heads of Agreement (HOA) to acquire ProSol Australia Pty Ltd. The transaction would deliver a leading position in tailing expertise throughout the Hunter Region while adding new members to the company.

Reportedly, the target company provides tailing engineering and process chemistry to mining & water treatment industries in NSW, having a leading position in the Hunter Valley coal industry with an ongoing relationship with major coal producers.

Further, the transaction provides opportunities to scale the business of the company, including utilisation of MaxiFlox®, OptiFlox® technology for major coal clients, and development of service-based model and revenue multiple. The transaction is designed as 55% cash and 45% equity in three tranches dependent on key financial milestones in FY 2020 and FY 2021.

Materials Sector Stocks

Key Terms (Source: Company’s Announcement)

In addition, the maximum number of shares to be issued under the transaction is anticipated to be 1.71 million. The company would be seeking approval for the issue of shares on 1 November 2019, and the acceptance of the resolution is necessary to proceed with an acquisition.

On 29 October 2019, SDV was trading at $0.56, surging up by 12% (at AEST 2:49 PM).

Hazer Group Limited (ASX: HZR)

Recently, the company presented at the ASX Small and Mid-Cap Conference. Accordingly, Hazer is a low cost, low emission hydrogen and synthetic graphite production technology. Hydrogen and graphite are both key products in a decarbonising economy, and the premium market for hydrogen from low-emission sources is emerging.

Hydrogen Economy (Source: HZR’s Investor Presentation)

Hazer Advantage

The existing hydrogen production technologies are expensive, large scale, centralised with high emissions. The Hazer process is capable of producing two significant outputs without creating any CO2.

It provides sustainable development attributes, including renewable fuel base, domestic and local energy source, waste-to-resource/waste-to-energy, and locally produced. In addition, the process has less carbon emissions than electrolysis with renewable biogas as feedstock.

The graphite production capability provides an opportunity to service industries engaged in production of lithium-ion batteries, lubricants, activated carbon, carbon black, advanced materials. The purity of the graphite could be increased to >99% by standard purification techniques.

Commercial Strategy & Plant

The company is progressing with opportunities, including build-own-operate, licensing, strategic alliance or JV opportunities. HZR has made progress through:

Hazer Commercial Development Project

The project would be the first larger scale, fully integrated deployment of Hazer technology. The plant has a proposed 100 tpa hydrogen production facility and ~380 tpa of graphite. In May 2019, the company executed MOU with Water Corporation, and in July 2019, the company appointed Primero Group as an engineering contractor.

Further, the estimated capital cost for the project is $15.8 million, having the potential to expand to commercial operation as hydrogen markets mature.

Collaboration with Mineral Resources

Mineral Resources Limited (ASX: MIN) holds 11% in the company through a strategic investment in March 2017. In December 2017, the company had entered into a binding collaboration agreement, under which:

  • It would collaboratively develop a nominal 10k tpa synthetic graphite facility in WA in three stages.
  • MIN to fund all stages of commercial development and the company would receive royalties.
  • In August 2019, the collaboration completed high-quality graphite production in Stage 1.

Initial Commercial Projects

The company has commenced discussion with potential customers in Asia for initial commercial projects. It completed a concept study for a 2.5 ktpa commercial scale Hazer plan that could be sufficient to supply ~200 buses or ~6000 vehicles at an estimated capital cost of USD 30 to 35 million.

Further, the initial commercial plants are expected to be between 800 to 2,500 tpa, and it is targeting the emerging low-emission hydrogen opportunities in Asia and Europe.

ARENA Funding

Recently, the company had reported that the application for funding from the Australian Renewable Energy Agency (ARENA) was approved by the Board of ARENA. The Board of the agency has approved to enter into an agreement of up to $9.41 million in funding to support the development of Hazer Process Commercial Development Project.

On 29 October 2019, HZR was trading at $0.48, up by 5.495% (at AEST 3:20 PM).

Alexium International Group Limited (ASX: AJX)

Recently, the company presented on its Strategic Growth Priorities on 15 October 2019. The company is a performance chemicals provider for advanced materials applications. In the presentation, the company provided its strategic plan for FY2020 to FY2023.

Strategies

Strategy: Expansion of Current Position in US Bedding Market

In the past 18 months, the company has increased its market position significantly in key textile markets, including mattresses and top-of-bed products. The fundamentals for US bedding cooling chemicals sales include a CAGR of 6.4% in US mattress sales and expanding cooling technologies into broader bedding market.

The company expects the current market share to grow in the mattress/textile segment, and comparable growth is expected for other Alexicool® markets. Growth in the mattress industry, and growing emergence cooling chemistry to provide additional growth.

Strategy: Commercialisation of FR NyCo technology for military applications

The company’s Alexiflam® FR NyCo Technology is a product for militaries with flame retardation capabilities. Its technology self-extinguishes, forming a strong char with no holes or cracks in char, no melting or dripping, and improved fabric properties.

Presently, the company has a partnership with Pine Belt Processing – current supplier to US Military. It looks forward to drive growth through adoption of the company’s product in key segments of the US military.

FR NyCo (Source: Investor Presentation)

Strategy: Expansion of Alexicool® products to broader regional and adjacent markets

The company expects to enter the Chinese market in FY2020, and Europe is in the medium-term time frame.

E-vehicles

The Alexicool® technology provides a non-electric means of controlling the interior temperature, thus reducing the battery drain from the air conditioner. The battery of an electric car is the critical component of the car.

Performance Apparel

Alexicool® products provide a durable cooling product to regulate body temperature under high physical exertion. In the performance apparel market, cooling & comfort fall under critical metrics.

On 29 October 2019, AJX was trading flat at $0.11 (at AEST 3:38 PM).


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