SMALL CAP IDEA: Majestic’s technological recycling efforts make it a product for the watchlist

In the small-cap sector, it is rare to find companies that are both revenue-generating and profitable, especially in the Aquis market, which is known for its start-up companies.

But Majestic Corporation (AQSE:MCJ), a recycling company founded by Australian-born entrepreneur Peter Lai, is a notable exception.

Interim figures were published on Monday showing a 92 per cent increase in turnover to $25 million, leading to a 33 per cent increase in pre-tax profits to $1.2 million.

Majestic is the embodiment of a niche company that is building a sustainable, defensible, fast-growing segment in the emerging circular economy: the sustainable system of recycling and reuse.

Its competitive advantage lies in the complex relationships with smelters and end users it has built and maintained over the past 25 years, allowing the company to create long-term value.

Barriers high

“Regulatory barriers and high capital requirements make it difficult for competitors to replicate the company’s operations,” notes Andrew Male, the company’s recently appointed non-executive director. “It’s not something you can just do.”

Majestic is strategically responding to the increasing flow of disposable IT equipment, catalysts and battery materials, as well as the growing need to recycle these materials.

The United Nations Environment Program reports that 54 million tons of electronic waste are produced annually, which amounts to about 7 kilograms for every person on the planet. Only 17 percent of this e-waste is currently recycled, and without significant action this figure is expected to double by 2050.

Wealth of material

Majestic’s recycling activities focus on three main areas: consumer and professional electronics, vehicle catalytic converters and base metals found in electrical equipment.

These processes yield a wealth of valuable elements, such as copper, aluminum, gold, silver, platinum, cobalt, graphene and nickel.

Male, a seasoned veteran of the extractive industries, emphasizes the potential of this approach: “One tonne of waste material can yield as much as 15 grams of gold,” he points out. In mining parlance, these are called ‘bonanza grades’: exceptionally high yields.

Majestic achieves this without the need for expensive exploration or the large capital investments typically required to develop a gold mine.

The extensive network of subsidiaries and branches extends all over the world. Through this network, the company collects, acquires, stores and processes materials, which it later returns to refineries and reintroduces into the global supply chain.

Long-term relationships

The company processes more than 30,000 tonnes of waste annually and has built long-term relationships across the industry, enabling investors to learn about key themes such as decarbonisation and national efforts to secure critical materials and supply chains.

Several factors position Majestic for sustainable growth. By focusing on niche markets, the company offers a highly personalized service to customers who are often overlooked by larger competitors.

In today’s world, where decarbonization and circular economy principles are gaining traction, Majestic’s focus on environmentally responsible practices resonates with clients seeking sustainable business solutions.

Looking ahead, the group has ambitious growth plans. Research from Pitt Street shows that the company is aiming for a 400% increase in turnover in the coming years.

Fast acceleration

Central to these ambitions is Telecycle Europe Limited, a subsidiary that owns a fast-growing facility in Deeside, Wales. Male is enthusiastic about the growth of the location: “Activities in Deeside have really accelerated in recent years and are on a rapid trajectory.”

Majestic also announced that it will conditionally acquire Telecycle.

The appointment of Male, who brings a wealth of management and capital markets experience from both Britain and Canada, signals that Majestic is assembling the talent needed for its next phase of growth.

In addition, the company’s recent Enterprise Investment Scheme (EIS) status offers generous tax benefits to investors, opening the door for venture capital funds to join Majestic’s shareholder register as the company looks to issue new shares.

One for the watchlist

Diversification and expansion of the shareholder base, which is currently dominated by a small number of early investors, will be key to increasing liquidity and increasing share value. This process could ultimately lead to a move to a higher exchange, although the company is remaining mum on this possibility for now.

As Male acknowledges, “We are effectively a publicly traded private company. But right now our goal is simply to increase awareness of Majestic and its capabilities.”

In other words: Majestic is definitely a film to watch.

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