M8 Sustainable brings waste management to ASX through $19.5m IPO

M8 Sustainable ASX M8S waste management IPO
M8 Sustainable has raised $19.5 million to list on the ASX and begin construction of a new waste landfill facility north of Perth, WA.

Waste management business M8 Sustainable is set to list on the ASX this Wednesday after raising $19.5 million through its initial public offering.

The Western Australia-based company, which will trade under the ticker code M8S, raised the funds by the issue of 97.5 million shares priced at $0.20 each, indicating a market capitalisation of almost $47 million.

The company operates a waste recycling facility on a leased site in Perth’s southern suburb of Maddington and provides operation and maintenance services to a waste compost and energy facility in Shenton Park, north of the CBD, via a long-term contract.

M8 also plans to develop a waste landfill facility in Gingin, a town located about 90km north of Perth, on land owned by a wholly-owned subsidiary.

Initial construction of the Gingin facility is expected to start this month, according to the company’s prospectus.

M8 non-executive chairman Robert McKinnon said the company planned to use the IPO funds to “grow and expand its existing operations”.

Business strategy

M8’s strategy involves maximising value from gate fees, resources recovery and recycling, as well as operating complimentary waste businesses.

The company charges gate fees for waste delivered to its Maddington site and future Gingin facility. It also intends to sell recyclable material produced from the Maddington facility such as sand, road base, drainage aggregates and metals.

In addition, part of the anticipated waste input to Gingin is expected to originate from the Maddington and Brockwaste facilities.

The company’s future ambitions include offering a high-quality recycling service in central locations close to major metropolitan arterial routes and investing in additional recycling infrastructure at Maddington to enhance its existing waste processing and disposal facilities.

It also hopes to acquire complementary recycling assets and potentially expand into the operation of waste-to-energy infrastructure in the long-term.

Use of funds

In M8’s prospectus, almost half of the IPO funds ($9.5 million) have been allocated to the development of the Gingin facility.

Another 28.9%, or $5.6 million, will be used to repay debt plus interest to the company’s main funder and major shareholder, SBANG Sustainable Energy.

Thai-incorporated SBANG holds a 40% interest in the Brockwaste facility that M8 services in Shenton Park. The remaining 60% stake in Brockwaste is held by fellow Thai company Star Universal, another substantial shareholder of M8.

The remainder of the IPO funds will be used for working capital and to cover expenses of the offers.

M8 said it anticipated the IPO funds to cover 18 months of full operations.

It should be noted that M8 has operated at a loss since its incorporation in July 2017.

Market exposure

M8 had been pitched as the only WA waste manager on the ASX outside of $4.9 billion Cleanaway Waste Management, which bought out Tox Free Solutions in 2017 for $831 million.

Former Tox Free directors Robert McKinnon and Richard Allen will sit on the M8 board as incoming chairman and non-executive director, respectively.

According to Mr McKinnon, waste generation is growing at a rate of 7.8% per year.

“With the Australian population currently only recycling 58% of all waste, the waste management sector has experienced significant structural change highlighted by higher regulatory imposts and a growing requirement to provide sustainable waste management solutions,” he said in his chairman’s letter.

“The waste management sector continues to display positive fundamentals, of increasing landfill levies and waste generation, improving resource recovery rates, industry consolidation and increasing demand for environmentally-friendly, sophisticated recycling solutions.”

Mr McKinnon said the company’s vertically integrated business model will include the acceptance and processing of waste, materials recovery, commoditisation and trade.

“Synergies will be delivered through the complementary downstream operations while aggregation and potential waste-to-energy expansion provide future growth prospects,” he added.