• Papyrus (ASX:PPY) wins $500,000 strategic investment from active small cap manager L39 Capital
  • Chairman Ted Bryt & L39 senior analyst Faisal Mahboob say the deal is pivotal for the company
  • Papyrus shares rise 35 per cent

Papyrus (ASX:PPY), a small cap that’s seeking to replace wood veneer products with banana veneer, just won another strategic investor.

Papyrus has veneering technology that turns waste trunks from banana palms into a more eco-friendly and cost-effective alternative to traditional wood veneer.

It has a factory in Egypt and has spent the last few years testing to see if its technology could produce commercially viable volumes of fibre.

Today it told shareholders ASX small cap fund L39 Capital liked what it saw and invested $500,000.

Melbourne-based L39 is an active manager that proactively approaches companies like Papyrus to help grow them.

“What we try to do is approach companies and structure attractive deals where we can potentially add some value,” L39’s Faisal Mahboob told Stockhead.

The shares will be issued at 1.2c, a 25 per cent discount to its 15-day volume weighted average price.

But Papyrus shares rose by 35 per cent this morning to 1.9c.

Papyrus (ASX:PPY) share price chart


‘A long time coming’

“It’s been a long time coming. They found us, they’d been watching us for a while and we fitted their investment criteria,” Papyrus chairman Ted Byrt told Stockhead.

Papyrus managing director Ramy Azer told shareholders it was the ideal time for a collaboration.

He noted the Australian government’s Recycling and Waste Reduction Bill, which creates a national framework to manage waste and recycling across Australia.

But Byrt clarified that the company’s primary focus remained on Egypt.

“We would want to establish something in Australia at the earliest opportunity. But our priority has to be to build the business in Egypt where we spent all this time and money,” he told Stockhead.

“That doesn’t preclude further investment opportunities into the company to help us do something in Australia.”


Why L39 invested

Azer promised shareholders L39 wouldn’t just pay up and sit back.

“They will be working actively with us to help achieve our vision of a scalable and commercial enterprise in the sustainability and renewable sector,” he said.

L39’s Mahboob echoed these words.

“What we liked about PPY is they actually have a factory in Egypt, they’re actually producing products, they’ve said that factory is operating at cash flow break-even, which is great,” he said.

Mahboob admits the company’s efforts to validate its technology had been unsuccessful to date but that now is a turning point.

“We’re going to try and get them to focus on the sustainability packaging side of things,” he said.

“Our goal is essentially to make this company ready for a much higher valuation at a much larger capital raise and maybe hand it off to an institutional broker.”