This is highly likely to be the year that things come together for NC6, but valuing the company has been difficult previously. In the absence of comparable companies, you might look to future profits based on potentially addressable markets. We have the rayon market at $30b, and can attack that with a Lyocell that is superior in every key aspect – stronger, finer and significantly more environmentally friendly. No reason not to be taking market share from other fibres either.
Then we have the personal wipes market, also around $30b, where we bring the same improved aspects.
But when comparing the competitor landscape in NC6’s April presentation, none were listed so a comparative valuation was difficult. With the listing of Spinnova in the 2nd half of 2021, this has changed. Spinnova has a current MC of around $1b, so around 70 times that of NC6, yet if anything we would appear to have a superior product and overall process with probably only a slight time lag to key partnerships and market.
Spinnova claim they can use waste, but appear focussed on using tree based cellulose, and their process would appear to need significant capex, whereas our cellulose can feed into existing facilities for quick ramp up. Their product appears to have similar characteristics to currently used fibre, whereas our has superior characteristics.
Both processes have great environmental credentials, but Spinnova still appears focussed on trees for feedstock.
So either we’re significantly undervalued, or they’re overvalued. I’d suggest the former, with the higher valuation probably due to the better profile they get in Europe, versus our current low profile in Oz. This will change as soon as high-end brands are linked to NC6, and taking our reports at face value, we can expect this reasonably soon, barring any further glitches. Certainly, we would expect it in the first half of this calendar year.
The Spinnova comparison has been touched on in various posts, but it might be useful to keep a running commentary in this thread as more details of both companies emerge this year. Things such as pricing, costs, quality, partners, customers, environmental benefits, etc.
I think there’s plenty of room in the market for both companies and others, with enormous potential based on consumer pressure and demand for more sustainable fashion. Will be interesting to see where valuations end up, but vary hard to see NC6 staying in the shadows for much longer.
Having a massive partner such as Birla already signalling to the market about the emergence of Nullarbor fibre is a clear indication of confidence and direction. NC6 have missed a couple of deadlines, but overall they are looking likely to deliver on multiple fronts soon, and they do so on a very low cost basis - they really take good care of shareholder funds which is another great tick for company culture.
