De.mem (ASX: DEM) provides bespoke industrial water treatment solutions combining its (i) unique water membrane technology product suites and (iii) specialist engineering skills. DEM is improving revenue quality through growing recurring revenues and revenue diversification. Further valuation re-rating is possible as the company grows recurring revenues and drives to cash positive.

1. BLETCHLEY
Park Capital
Level 5, 1 Collins St,
Melbourne, VIC 3000
investors@bletchleyparkcapital.com.au
Share Price – Absolute Performance
DEM has outperformed the ASX Small Industrials
index by ~40% over the last 12 months, as the market
has commenced the process of re-rating the stock, given
its improving revenue quality and growth.
This document does not constitute investment advice to any reader and is not a recommendation to buy or sell any securities of any company.
We do not accept any responsibility for updating or correcting any errors or omissions which may become apparent after this has been issued.
Equity Research Initiation – 2 December 2019
De.mem (ASX: DEM) provides bespoke industrial water
treatment solutions combining its (i) unique water
membrane technology product suite and (ii) specialist
engineering skills. “De.mem” is short for “decentralised
membranes”, namely decentralised (ie. on customer
premises), modularised, membrane technology solutions.
Stock and Capital Structure Overview
Ordinary Equity 2019A
Shares on issue (source: Appendix 3B) 155,657,914
Share price (A$) (28 Nov 2019) 0.27
Market cap (A$m) 42.0
52 week high-low (A$) 0.355 - 0.09
Exercice Price
(cps)
Expiry No. options issued (m)
30 30 Mar 2020 3.80
30 12 May 2020 0.75
30 11 Sept 2020 1.25
30 10 Apr 2021 0.25
30 13 Apr 2021 0.25
Total no. options issued 6.3
ASX-listed industrial water treatment tech
company, with growing recurring revenues
and peer-relative valuation discount
Revenue Models – A key positive structural change is
revenue quality improvement, with growing recurring revenues
and revenue diversification by geography, sector and product
mix.
In FY18, DEM’s $10.5m revenue comprised 3 revenue models,
with ~40% recurring revenues:
• 5% recurring consumables sales (eg. pumps, filters,
membranes)
• 35% recurring BOO (ie. leasing modular solutions to clients)
and Operations & Maintenance (ie ongoing equipment
servicing)
• 60% Equipment Sales (ie. sales of modular solutions to clients).
Revenue Outlook – The shift to recurring revenues is
summarised in Table 1. DEM appears likely to commence
FY20 (Jan 2020) with $9.8-$11.5m of recurring revenues, with
further revenue from equipment sales (~$6.3m in FY18).
Investment Thesis
DEM appears likely to re-rate (and reduce its discount to
ASX-listed peers) as it improves revenue quality through
growing recurring revenues and revenue diversification.
As DEM achieves cashflow break-even, further valuation
re-rating is possible. See ASX-listed comparables PET, FLC,
SDV, PO3 at page 8.
10 reasons we like DEM
(i) DEM is the cheapest ASX-listed industrial water
treatment company (on an EV/revenue multiple basis) –
see page 8
(ii) Strong regulatory tailwinds, eg. NZ’s 25-year National
Policy Statement for Freshwater Management, further
consultation
(iii) Growing recurring revenues through BOO and O&M
services
(iv) Diversifying revenue by geography, industry, and
product. New Zealand agricultural segment is a target
growth market.
(v) Quality customers, eg. Monadelphous, Rio Tinto
(mining), St Hillers (infrastructure), Givaudan (food &
beverage).
(vi) Technology competitive advantage – see pages 16-18 and
32 of ASX investor presentation
(vii) Almost operating cashflow-break even – see Sept qtr
2019;
(viii)Significant customer cross-sell and up-sell optionality
through strategic acquisitions of Plumbtech (Tasmanian
food & beverage segment) and Geutec (water treatment
chemicals);
(ix) Growth options include consumer water filtration – here,
here
(x) Institutional investor support of BOO growth – see here
Revenue A$M
10%
growth
20%
growth
30%
growth
Source
DEM – FY18
BOO and O&M
3.7 4.1 4.4 4.8 Page 10
Plumbtech FY19 2.5 2.8 3.0 3.3 ASX – 29 July 19
Geutec FY19 1.8 2.0 2.2 2.3 Presentation
DEM – FY18
consumables
0.5 0.6 0.6 0.7 Page 10
New BOO contracts 0.3 0.4 0.4 0.4
Assumed $1.7m
over 5 years
Totals 8.9 9.8 10.6 11.5
010203040
28-NOV-18 28-FEB-19 31-M AY-19 31-AUG-19
SHAREPRICE(CENTSPERSHARE)
DEM Stock Price
0100200300
28-NOV-18 28-FEB-19 31-M AY-19 31-AUG-19
BASEINDEX
DEM Relative to ASX Small Industrials
DEM Relative to base index = 100
DEM Small Industrials Relative to base index = 100

2. BLETCHLEY
Park Capital
Level 5, 1 Collins St,
Melbourne, VIC 3000
investors@bletchleyparkcapital.com.au
This document does not constitute investment advice to any reader and is not a recommendation to buy or sell any securities of any company.
We do not accept any responsibility for updating or correcting any errors or omissions which may become apparent after this has been issued.
Technology Competitive Advantage
DEM tech offering has a collaboration with Nanyang Technologica
University (NTU), Singapore for research and development of its
technologies.
NTU is ranked #2 in the world for membrane research, by Lux
Research.
High Quality Customers diversified across sectors
Customers include Rio Tinto, Monadelphous (mining), St Hilliers
(infrastructure), food & beverage (Givaudan). See page 12.
Financial Analysis
As at 30 Sept 2019, DEM reported $2.8m cash balance, with an
additional $2.95m received in October 2019 (total ~$5.75m).
There is no financial debt, convertible notes, or other structured
financial instruments on balance sheet.
DEM is approaching operating cash break-even, with operating
cash outflow of only -$30k and the highest ever quarterly cash
receipts from customer of $3.4m.
Visible equity upside potential
At 27cps and assuming ~$14m of FY19F revenues, DEM trades at
EV/revenue multiple of 3x, a ~75% discount to its ASX-listed peers.
See page 8.
As revenue quality improves, DEM’s valuation could re-rate.
Assuming FY20F revenues of (say) $20m results at 3x implies a
market capitalisation of $60m. If DEM re-rates to 4-6x, this implies a
market cap of $80m - $120m is possible (2-3x upside on current
market cap of $42m).
Large addressable market, with regulatory tailwinds
The global water and waste water solutions market has an
estimated annual capital expenditure of $240 billion.(2)
The global market for packaged / decentralised water treatment
systems was valued at US$12 billion in 2015 and is expected to
grow at a CAGR of 10.4% to reach US$21.8 billion by 2021.(3)
Low-cost, strategic acquisitions provide cross-sell growth options
The combined acquisitions of Pumptech and Geutec were no
significant in financial cost (<5% of total DEM marke
capitalisation), but provide significant cross-sell growth options int
food & beverage segment (Pumptech) and chemicals (Geutec).
Key Recent News
Date Event
11 Nov 19 First revenues from new 5-stage domestic water filter
23 Sep 19 Geutec acquisition
27 Sep 19 Placement with leading investors
12 Sep 19
Launches new in-house developed microfiltration
membrane
28 Aug 19 First orders in diversified markets
29 Jul 19 Pumptech acquisition (Tasmania)
27 Jun 19 Welcomes leading institutional investors to register
18 Jun 19 First revenues from new Forward Osmosis Membrane
26 Feb 19
First Commercial Order – Domestic Water Filters
(Singapore)
22 Nov 18
Release of first self-developed membrane for
commercial use
18 dJuly 18
Launched a new product line for ‘point of use’
domestic water filtration
Outlook and Key Catalysts
• Retention and expansion of existing customer
contracts
• New customer contracts
• Regional and international expansion, with a
focus on Europa and Asia Pacific
• Strategic partnerships and mergers & acquisitions
• Expansion of current technological portfolio
Equity Analyst Coverage – no recent analyst coverage.
Further Research Resources
1. http://demembranes.com/
2. https://www.linkedin.com/company/de.mem-limited/
3. Markets and Markets
4. Frost and Sullivan
Revenue Diversification
DEM is diversifying by geography, customer segment and
product mix.
• In FY18, ~90% revenues were generated from Queensland
in the mining, municipal and infrastructure segments.
• The Pumptech acquisition expanded the revenues into
Tasmania, Australia and diversified the product range into
the food & beverage segment.
• Expanded operations with new regional offices established
in Melbourne and Adelaide
• The Geutec acquisition provides a European base
(primarily Germany) and complements the water
membrane technology with specialist industrial water
chemicals products.
• New Zealand is a target market, with DEM welcoming
strategic NZ investors as a pathway to NZ customers,
particularly in the agricultural sector.
Key Investment Considerations
ASX-listed industrial water treatment tech
company, with growing recurring revenues
and peer-relative valuation discount

3. BLETCHLEY
Park Capital
Level 5, 1 Collins St,
Melbourne, VIC 3000
investors@bletchleyparkcapital.com.au
Board
Strong Industrial Background.
Executive
Highly qualified and experienced Management Team.
Cosimo Trimigliozzi | CHAIRMAN
• COO, Wild Flavors International
• Managing Director, Givaudan Asia
• MBA, University of Basel (Switzerland)
Andreas Kroell | CEO AND DIRECTOR
• Director, New Asia Investments
• Corporate Finance, Deutsche Bank
• Audit and Advisory, Deloitte
• MBA, University of Frankfurt (Germany)
Bernd Dautel | NON-EXECUTIVE DIRECTOR
• Director, New Asia Investments
• Managing Director, Wieland Metals Asia
Pacific
• Master of Chemical Engineering, Karlsruhe
University of Technology (Germany)
Shane Ayre | MANAGING DIRECTOR, AKWA-WORX
• Founder of Akwa-Worx
• 20 years industry experience
Kian Lip Teo | COO
• Lien Aid
• Bachelor/Master, Nanyang Technological
University (Singapore)
David Chua | DIRECTOR, MEMBRANE MANUFACTURING
• 10+ years experience in membrane production
• Mann +Hummel
• Hyflux
• Bachelor/Master, Nanyang Technological
University (Singapore)
Nicanor Suarin | CHIEF ENGINEER
• 30+ years experience in process and system design
• Hyflux
• Doosan Hydro
• Bachelor of Engineering, MBA (Phillipines)
LEGAL DISCLAIMER
1. This document does not constitute investment advice for any reader. 2. While this document is based on information sources which are considered reliable,
we have not verified independently the information contained in the document and our directors, employees and consultants do not represent, warrant or
guarantee, expressly or impliedly, that the information contained herein is complete or accurate. Nor do we accept any responsibility for updating any
advice, views or opinions, contained in this document or for correcting any error or omission which may become apparent after the document has been
issued. 3. We do not accept any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this document or for any
resulting loss or damage (whether direct, indirect, consequential or otherwise) suffered by the recipient of this document or any other person. 4. BPC may
receive a commercial retainer by the Company to produce this document and may take or sell positions in the Company’s securities at any time.
Stuart Carmichael | NON-EXECUTIVE DIRECTOR
• Partner and Director, Ventnor Capital
• Executive Vice President, UGL Limited
• KPMG Corporate Finance
• Chartered Accountant, Bachelor in Commerce
Michael Edwards | NON-EXECUTIVE DIRECTOR
• Partner and Director, Norwood Systems and
Dawine Limited
• Bachelor in Business (Economics/Finance), BSc
(Geology)
Key Risks and Mitigants
• Revenue growth rate – mitigated by range of
revenue growth options
• BOO contract renewals – mitigated by long-
standing customer relationships
• Acquisition integration – mitigated by low value
of acquisitions relative to total market
capitalisation (both Geutec and Plumbtec total
value is less than 5% of DEM market
capitalisation)
ASX-listed industrial water treatment tech
company, with growing recurring revenues
and peer-relative valuation discount