Why the Papyrus (ASX:PPY) share price is rocketing 21% today

The Papyrus (ASX: PPY) share price is soaring today on the back of a major business opportunity in China. Let’s take a look.

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The Papyrus Australia Ltd (ASX: PPY) share price is rocketing today as the company released an update on a new opportunity in China. Shares in the paper producer are currently trading 19% higher at 5.6 cents after reaching an early afternoon high of 6 cents.

Papyrus develops technology that converts the waste trunk of banana palm into alternatives from forest wood products. It can be used to make paper, packaging, furniture, building and also in construction.

Why is the Papyrus share price flying today?

Shares in Papyrus are performing well today as the company was granted ‘first right’ to exploit technology in China.

Papyrus aims to sell turn-key factories that produce banana fibre products to operators in banana-growing countries. With China being the second-largest banana producer worldwide, this makes it an ideal destination for the company’s tech. What’s more, China has a plastic packaging waste problem which the Chinese Government demands be addressed.

Papyrus claims it can address this problem by selling ‘turn-key’ factories and licensing the rights to establish banana fibre manufacturing facilities in China. Crucially, there is potential for this to occur with the company’s memorandum of agreement (MOA) signed on 7 February.

The process

The MOA contemplates a 5-stage milestone process which Papyrus outlined in today’s release.

  1. Stage 1 contemplates establishing a joint venture (JV) company under Chinese law, with a completion date at the end of March.
  2. Stage 2 requires the JV company to undertake a comprehensive research project in China regarding the government and all other requirements to establish the first project within or near the banana-growing areas.
  3. The third stage would require the JV to organise field trips for the Papyrus officers to travel to China and assess the proposed site for manufacturing purposes.
  4. Stage 4 would require the company to set out a business plan for its plan’s first project.
  5. The final stage would require executing a contract between Papyrus and the JV company no later than the end of July 2021. Together with the deposit by Papyrus to buy the plant and equipment necessary for the first project.

About the Papyrus share price

It has been a great 12 months for the materials company that has seen its share price jump 480%, albeit from a low trading base of 1 cent last February.

Based on the current Papyrus share price, the company has a market capitalisation of $24 million.

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Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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