As the ‘waste export ban’ looms, these four ASX small caps are rewriting the recycling rulebook
Waste management sounds as boring as it comes, but what many people don’t realise is that a new era for stuff you’d normally chuck out is dawning, especially on the ASX in the recycling and green tech space.
Australia is moving fast towards waste recycling. By mid-2024, a full export ban on waste will come into effect. By that time, we will have to recycle around 650,000 additional tonnes of plastic, glass, paper, and tyres each year.
To support this initiative, the Federal government has committed to a $1 billion transformation of the recycling industry, through the Recycling Modernisation Fund, and the Modern Manufacturing Strategy.
In the bigger picture, waste is a crucial industry in the new, global ESG economy. With so much funding going into ESG – green bond issuance for example, has cracked the $1 trillion mark – the industry is literally on the cusp of disruption.
Both companies have moved swiftly to take advantage of the fast moving industry. Cleanaway, for example, recently partnered with Asahi Beverages of Japan to establish a $30 million recycling facility in Albury. Major investors have also been keen to get their hands on this sector, with Bingo now the target of a $2.6 billion takeover by a Macquarie Bank-led consortium.
Apart from those two giants, there’s also a handful of small caps you might want to consider to tap into this burgeoning space.
We’ve named four of these small caps below.
SciDev is developing the chemistry and process control for solids-liquid separation. It brings in technology and manufacturing capabilities to solve environmental issues for the mining, construction, and water treatment markets.
The company is specifically focused on fine particle separation chemistry (colloid chemistry), which is reported to be a US$11 billion sector within the broader US$100 billion global commodity chemistry market.
Recent significant contract wins include Shell, Melbourne Metro, and a field validation work for BHP at Olympic Dam copper mine.
Its latest financials show a 23 per cent increase in 1H FY21 gross profit, and its share price has shot up almost 150 per cent over the past year.
Papyrus develops technology that converts the waste trunk of the banana palm into products used in the packaging, furniture, and construction industries.
The company says its products have qualities not found in existing wood-based products, due to the ability to preserve the inherent natural qualities of the banana tree trunk.
The focus of the company in the past year has been to expand its Papyrus Egypt business, and apply its know-how in a developing country where bananas are grown.
The company has also had success in Japan, exporting its veneer products to the Yamaha musical instruments manufacturers, as well as a recent licensing agreement in China for its technology.
The latest half year of FY21 shows $0.18 million profit before tax.
Its share price has surged by 360 per cent over the past 12 months.
RAN is a manufacturer of recycled plastic pallets. Its thermo-fusion technology allows it to make plastic pallets from 100% recycled mixed waste plastic, at a price that is competitive with wood pallets.
It currently has four production lines operating in Indonesia, and sells its pallets under the brand Re>Pal.
The company says its pallets are a sustainable alternative to timber, which subsequently reduces deforestation. Deforestation is especially a major problem in Indonesia, and the government there has banned logging of primary forest to supply wood for pallets. RAN aims to take advantage of these developments.
The company delivered a net loss for the full FY20 of $3 mllion, which was a substantial improvement from its $9.2 million loss in 2019.
Its share price has surged by 130 per cent over the past year.
Pearl focuses on the environmental technology for the waste tyre industry.
It applies thermal desorption technology to convert end-of-life tyres into valuable secondary products such as fuel oil, steel, carbon char and energy. It’s the first Australian company licensed to thermally treat tyres, after the government banned the export of waste tyres.
The company says it’s serving a large addressable market, with 1.6 billion tyres discarded globally every year, of which Australia makes up 56 million. Pearl says it has processed over 1 million tyres to date at its Stapylton facility.
Revenues for the FY21 half show a 40 per cent increase to $1.5 million, for a net loss of $4.1 million. It share price has risen by 6 per cent in the past year.