Current share price is $0.13.
The broker noted that the company is successfully developing its pipeline of flame resistant (NYSE:FR) chemical treatments and well on the part to commercialisation.
It also noted potential for share price to hit $0.55 in an optimistic case due to increased capital.
The following is an extract from the Research Report.
We expect FY14/15 to be a defining year for Alexium as all products increase in sales but with a particular focus on growth in Home Furnishings/Upholstery.
We have accounted for dilution from the capital raising and SPP and we have adjusted our probability of success for all Alexium's products in light of the company's continued advancement of their product range.
We view the last six months as serving as a major de-risking period for the Company as further customer contracts have been signed and additional chemical sales have been achieved.
Furthermore, new products in different target areas have been launched (home furnishings) and repeat orders for these products received. Initial sales have been a little less than expected but we see this as merely a timing issue
We believe recent share price weakness creates an opportunity for investors.
It is important to note that it takes time for a disruptive technology to gain traction in such an industry as Textiles which is less amenable to change than other industries.
First revenues are always the hardest to attain for an emerging company and we believe the company's revenues will steadily grow from here.
New Customers signed, New Partnerships formed and various Sales Contracts executed
New Customers (iTextiles, Euroflam) and new partners (Marlin Co.) is further evidence of Alexium's novel technology being validated and accepted by the industry in which it operates.
Management continue to be very positive regarding near term sales and this is shown in the Company's July Newsletter where Management refer to 12 current development/trial projects with Customers across the product spectrum.
Each project represents a significant (~$0.5m) p.a. average revenue opportunity with small sales quantities on all products already being booked.
ICL Grant and Collaboration to co-develop flame retardant chemicals and treatment packages.
The $250,000 grant from the South Carolina/Israel Collaborative Industry R&D Program is globally significant and should not be underestimated by the investment community as it is akin to a biotech collaborating with a global pharmaceutical company and is further validation of Alexium's novel technology.
Sales Team Strengthened and Expanded
Alexium has expanded its sales team and added key industry heavyweight figure Jon Heard. This will drive sales as Mr Heard has a vast network of contacts and extensive experience in the FR industry having grown his own FR Company to the stage it was acquired by leading global textile & fiber producer INVISTA.
Successful capital raising significantly strengthened balance sheet
The successful capital raising involved a Placement to Institutional and Sophisticated Investors and a Share Purchase Plan strengthens Alexium balance sheet leaving $4.2m as of 30th June. We see this increased cash level being sufficient to provide runway for at least the next 1 ½ years at current burn rate of ~$250,000 per month, increasing chemical sales will significantly extend the runway further.
New products brought to market increasing product offering
The contracts with Euroflam (U.K. based FR commission finisher specialising in home textiles, furnishings) and iTextiles (a regional distributor of premium textile products and brand chemical intermediates in Pakistan) are just starting to bear fruit.
The textile industry in Pakistan and the Middle East is a $13 Billion market alone. Furthermore iTextiles® is closely associated with industry majors including INVISTA and Dow Chemical.