Industrials
PCT has developed a patented recycling process which separates colour, odour and contaminants from plastic waste feedstock to transform it into ultra-pure recycled polypropylene (PP) - a massive market with no real direct competition. Industry PP production is forecast to scale to 180-200bn lbs per year. Ironton (PCT’s Ohio plant) is close to achieving long-awaited “critical mass” and lays the groundwork for many larger-scale plant builds over the next 5 years (Ironton is expected to reach 120m lbs per year with each additional plant adding 1bn of new production). Fantastic long-term economics offering ~30% ROIC. PCT can generate $0.60 per Pound of EBITDA. TP (YE24) $17.5 (>200% upside).
Edition: 184
- 19 April, 2024
Chemicals: Recent declines are overdone
Materials
Chemical equities' performance is worse than anything we have seen in recessionary periods over the last 60 years, suggesting limited downside and significant upside for some. Sector balance sheets and cash flows are far better positioned today than in 2008/09. For 2023, Hassan Ahmed prefers companies that may benefit from catalysts (Tronox and Braskem), secular changes within their markets (Olin), or have high China / Europe exposure (Covestro and Tronox). He sees PureCycle as a high-risk / high-return play - TP $30 (300%+ upside).
Edition: 151
- 06 January, 2023
PureCycle Technologies (PCT)
Industrials
PCT is a pioneer in the growing and untapped polypropylene recycling market with a novel and low-cost technology. Its fixed product price, which is at a premium to the market, and fixed raw material costs will result in stable and very healthy EBITDA margins exceeding 50%. Hassan Ahmed’s 12-month TP of $30 (50% upside) uses a plant level DCF analysis that conservatively only credits valuation for the start-up of 9 facilities by 2027 even though management are aiming to have 10 up and running by 2024 and 30 by 2030.
Edition: 112
- 11 June, 2021
SPAC Idea Forum highlights several interesting opportunities
Despite the recent carnage in the sector, judging by the turnout at MYST’s latest Forum, interest in SPACs has not waned at all. While there was some lively bull vs. bear debates (PureCycle Technologies, Jaws Acquisition Corp, Dragoneer Growth Opportunities Corp), MYST felt the most compelling ideas included Gores Metropoulos II - less expensive and more vertically-integrated Airbnb with experienced sponsor. Mudrick Capital Acquisition Corporation II - leader in the "red hot" collectibles market; new licensing deals and NFT optionality to accelerate growth/GMV.
Edition: 111
- 28 May, 2021