Lots of plastic waste. Tighter regulations in the UK and the EU. Who benefits?
10th November 2022 |
It’s almost 19 years to the day when recycling reached UK households.
The Household Waste Recycling Act would ensure local collection of at least two types of recyclable waste from every UK household by 2010.
In other words, our trusty green bin would now have a blue companion.
However, recyclable waste, and in particular plastic, continues to reach landfill sites at an alarming rate.
Out of the five million tonnes of plastic consumed each year in the UK, half of which is used for plastic packaging, only one quarter of it is recycled.
Much of the remaining plastic ends up in landfill sites or polluting the environment.
The hard numbers are worrying. For example, in 2019, plastic waste accounted for 3.4% of global emissions. Emissions from plastic are set to double by 2060.
The decomposition of plastic emits a greenhouse gas called methane. Methane warms the planet at roughly 86 times the rate of carbon.
Therefore, reducing plastic waste is essential if we are to reduce the impact of climate change.
On 7 November 2022, a UK government department, the Environment, Food and Rural Affairs Committee, called for a ban on the export of plastic waste from the UK by 2027.
The UK currently exports around 60% of its waste, with Turkey being the main destination. It’s cheaper for the UK to export waste than process it here.
However, some of this waste is being dumped and burned illegally abroad, compounding the plastic and climate change problem.
Whilst the ban isn’t in writing yet, there’s a possibility it could supplement existing plastic packaging laws in the UK.
Back in April 2022, the UK Plastic Packaging Tax came into force.
Plastic manufactured or imported into the UK comprised of less than 30% recycled plastic is taxed at a rate of £200 per tonne.
The European Union (EU) is also seeking to introduce tighter packaging measures.
These measures include enforcing minimum requirements for plastic packaging and reducing excess packaging shipped by European retailers.
It is, as they say, an ill wind that blows nobody good. In this instance, the tighter plastic packaging regulations should be good news for Frontier Tech Investor portfolio holding MPAC Group (LSE: MPAC).
MPAC is a provider of packaging and automation solutions to consumers in the pharmaceutical, healthcare and food and beverage industries.
The company prides itself on delivering sustainable, robust packaging solutions through its state-of-the-art machinery.
For example, it has helped consumer goods giant Procter & Gamble to transition to plastic-free cartoning for its toothbrushes.
MPAC has also helped Nestlé substitute plastic sticks for paper.
The company even incorporates biodegradable materials into its packaging. It has done this through the use of bagasse, which is sugarcane pulp and a viable alternative to plastic.
The price of MPAC has fallen by nearly 56% since we placed it on the Buy List.
However, with the strong tailwinds behind sustainable packaging, we are confident its share price can head higher in the coming months.
We reiterate our BUY recommendation on the stock. You can find the original recommendation here.
Buy list update
Aston Martin Lagonda (LSE: AML)
Aston Martin is a provider of luxury sports cars.
The company has had to negotiate an uncertain 18 months, facing soaring debts against a backdrop of macroeconomic turmoil.
However, the company is moving towards solid ground.
Following the launch of a rights issue earlier this year, with the backing of Saudi Arabia’s Public Investment Fund (PIF), the company successfully raised £654 million, taking its cash balance to £772 million. This is almost double its cash balance as of December 2021.
Aside from the financial stability given by PIF, Aston Martin’s latest figures are fairly encouraging.
For the nine months to 30 September 2022, the company recorded revenues of £857 million. This is a 16% increase on the same period in the corresponding year.
In part, this has been fuelled by rising vehicle prices and strong demand across certain product lines. Orders for its DBX model are up 40% year on year.
Despite the uptick in revenues, Aston Martin still faces challenges.
For instance, it is currently grappling with supply chain disruptions, which caused sales volumes to be 4% lower in the nine months to 30 September 2022 relative to the previous corresponding period.
The company also recorded an operating loss of £148.4 million, more than double the £68.2 million figure recorded in the previous corresponding period.
What really matters is this: an uptick in revenues and strong demand for supercars, which you can be reminded of here, could really boost the company’s fortunes.
What’s more, the stock market is now looking more favourably towards Aston Martin.
Between 2 November and 8 November 2022, its share price has increased from 89.58GBp to 140.65GBp. That’s an increase of 57%.
A long road still lies ahead for Aston Martin, and we await to see how it progresses under the stewardship of PIF.
We reiterate our HOLD recommendation on the stock. You can find the original recommendation here.
The Frontier Tech Investor “Top Three”
Sometimes it’s hard to decide on which stocks to invest in from our Buy List.
Below is our Frontier Tech Investor “Top Three” section showing three stocks in open BUY positions. If you’re trying to figure out what to invest in next, these are three that we think are a great place to start.
This doesn’t mean our other stocks are no good: this is just a tool to help you spot the next Frontier Tech Investor stock that could be worthy of your consideration.
Clean Power Hydrogen (LSE: CPH2): Hydrogen is touted as the future of energy. Its versatility in powering transport, heating homes and transporting energy could make it a mainstay of the UKs green energy transition. In fact, the UK is seeking to generate 35% of its energy from hydrogen sources by 2050. Clean Power Hydrogen could become one of the pillars of the hydrogen energy world with its revolutionary electrolyser technology. It has found a cheap and efficient way to extract hydrogen from water and power, and is one of the first hydrogen stocks to list on the UK markets. You can find the original recommendation here.
HydrogenOne Capital Growth (LSE: HGEN): HydrogenOne is an investment fund listed on the LSE. It provides broad, diversified exposure to several private and publicly-listed hydrogen companies, encapsulating the entire hydrogen trend. One of its main constituents is Elcogen, a market leader in the provision of hydrogen fuel cells and stacks. With the UK government injecting £240 million into the hydrogen sector as part of its hydrogen strategy, now could be an opportune moment to take a position in the stock. You can find the original recommendation here.
The HANetf Sprott Global Uranium Miners UCITS ETF (LSE: URNM): URNM is an exchange-traded fund which provides diversified exposure to the nuclear energy industry by investing in uranium producers. Uranium is an essential ingredient in the generation of nuclear energy. The index it tracks invests in giants of the nuclear energy world, including Cameco and Kazatomprom. With tailwinds behind nuclear power remaining strong in the face of rising energy prices, geopolitical conflict – and the wider green energy transition – we believe that URNM has a strong investment case. You can find the original recommendation here.
Sam Volkering
Editor, Frontier Tech Investor
Elliott Playle
Analyst, Frontier Tech Investor
