No news is no news! PPY are on the cusp of either greatness or failure.
The 'proof of concept' will come when Hayot coughs up the $2 million which is contingent on: "successful demonstration of the Papyrus Commercial Manufacturing Facility which is nearing completion in Nth Queensland".
Original prospectus figures put the cost of a banana paper manufacturing line machine ("line") at less than $600,000, then add factory building costs of $1 million- total capital cost $1.6 million.
The annual production potential was 20,000 metric tonnes of material @ $1000 per tonne market price giving revenue potential of $20 MILLION per annum for EACH LINE! Costs of production were estimated at $150 per tonne. So 'prospectus profit' is over $15 MILLION per line.
The key engineering problem back in 2005 was to triple the throughput of the original prototype lines. The company has never actually commented since then whether the prospectus forecasts are being achieved (particualrly in regard to the speed of the machines), so the Hayot payment will be a strong signal of engineering success. The best indication is the 12 January announcement which said "We have undetaken a number of verification tests of the manufacturing line during construction and results to date are consistent with our expectations".
Either this process works or it doesn't! If it does (and assuming the market for the product exists- perhaps the remaining big if)- the potential profits are staggering!!!
At $1.5 million to install a line and $20m revenue per machine the profitability is fantastic. Lets be ultra-conservative and 'double the running costs and halve the revenue' and then halve the result again(!!)----> there would still be over $3 million dollars profit available per line. Considering PPY are talking about potential for the QFL joint venture for 15-20 lines in Australia (1% of worlds banana production) and 180 lines in Vietnam alone, the potential is truly breathtaking- literally thousands of lines worldwide. There is also now production possibilities well advanced in the Carribbean with the said Hayot family.
With some marketing agreements in place all the signs are there for a massive re-rating of PPY IF THE TECHNOLOGY WORKS. The current proce weakness may just reflect some profit taking by those who loaded up a little more at 44c in the recent issue??
The key remaining risk is whther a market exists for the banana paper and veneers.
Technology note: PPY's process takes a 2 metre length of banana TRUNK and carves a long thin strip of banana trunk fibre by spinning the trunk against a blade. A second trunk is similarly cut at 90 degrees, and the two pressed together to create a roll of raw 'paper'. Note the output is 'raw' and can be supplied as feedstock for other value added products- packaging, wallpaper, cartons, building paper etc etc etc. The key differentiator for the PPY process (apart from low cost) is zero pollution and zero greenhouse gas emissions and that the process uses a raw material that is totally unused and is ubiquitous in the Tropics around the world. One 'line' is small enough to be decentralised within the individual banana plantations.
PPY Price at posting:
48.0¢ Sentiment: Buy Disclosure: Held
