Alexium International Group Ltd (ASX: AJX)

Expecting improved performance: Chemical development company, Alexium’s stock is down over 19% in last three months (as at December 08, 2017) and has been on a downswing lately as well. The group has now completed a $12 million institutional placement of 34.3 million shares with a further $3 million flagged to be raised through a Share Purchase Plan (SPP). The company’s placement was oversubscribed and included new institutional investors. Under the SPP, eligible shareholders can purchase up to $15,000 worth of shares at the same price as the placement ($0.35 per share). AJX will use the funds to invest in new equipment, product testing and intellectual property protection, strengthen its balance sheet ahead of anticipated customer production ramp-up and new product trial requirements, and expand its product development team to support new and existing market opportunities. AJX has highlighted that its December quarter gross margins have improved and anticipated to be 27-28% at the back of margin focussed strategy and customer mix. The group also expects its full-scale production trial in Q3 FY18 with regards to military uniform supply chain to US Department of Defense. Given the strategic partnerships, efforts on improving margins and overall performance, we give a “Hold” on the stock at the current price of $0.37
 

AWE Ltd (ASX: AWE)

AWE surges on a proposal from MIN: While shares of AWE Ltd surged 16.4% on December 11, 2017, Mineral Resources (ASX: MIN) plunged 8% with the news that the latter has sent-out an acquisition proposal to AWEafter the close of trading on 8 December 2017. This entails a scrip acquisition at $0.80 per share structured as one new MRL share for each 22.325 AWE’s shares held, to be effective via a scheme of arrangement. The offer values AWE at about $507 million, and is not conditional on due diligence; and further seems to marry well with MIN’s clean energy strategy of securing gas assets. With this, it appears that the oil and gas player is witnessing a bidding war considering AWE receiving an earlier takeover offer from China Energy Reserve and Chemical Group Australia (CERCG Australia). CERCG had put forth a revised all cash takeover offer of 0.73 per AWE share, last week only. MIN’s proposal now outbids the proposal from CERCG. 

Meanwhile, AWE will evaluate both the proposals and update the market as shareholders are asked not to take any action on the acquisition news. On a side note, AWE also provided an update on various corporate activities to ensure shareholders are fully informed during the company’s Share Purchase Plan (SPP) offer period. The group’s corporate debt facility limit has been reduced from A$300m to A$125m post the successful Institutional Placement in November 2017 that raised A$38m; and will account for saving $1.6m per year in fees. AWE is also required to pay the underlying principal amount of US$7.0m within 30 days as per the tax assessment provided by Indonesian Tax Office (ITO) in relation to the 2012 acquisition of the Anambas PSC and the Northwest Natuna PSC.

We maintain a “Hold” on AWE at the current price of $0.85

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