Ecosynthetix Inc (ECO)

[savin4college]

The wait has been long - but the time is now

Ecosynthetix (ECO.TO or US OTC ECSNF - Gray market) recently outlined its progress in seeking commercialization of its bio-adhesive for the wood panel market during its Q2 results and call.

(did I mention they have US $57M of cash!!! - they do - and a market cap of around US $70M)

They are making solid progress - much slower than anticipated but reflective of the challenges of getting large wood panel mills to stop production to trial new adhesives during the busy production season.

Despite these challenges they are advancing many different dialogues in what is a multi $B annual market for adhesives.

Why do I care about wood panel adhesives?

Because the State of California established regulations against the use of urea-formaldehyde-containing adhesives which are used in the bulk of wood panels.

Better yet - ECO just reported that the US EPA has issued similar regulations for the entire US - effective in one year - so now all panel producers need to find a path to meet this requirement - and ECO's DuraBind adhesive is the one product that meets the performance requirements AND does so at a cost at parity with the Urea-Formaldehyde formulation.

And major retailers - IKEA and Walmart that we know of - have put in place mandates to move to "No Added Formaldehyde (NAF) adhesives in the wood panels they sell that's great for ECO and the few other bio-adhesive makers - none of which can match ECO's pricing.

Listen to Ecosynthetix Q2 Call

Management is impressive and disciplined - focused on cost management and executing on this new product opportunity. They said their dialogues currently touch on 50 different mills that could each account for $500k - $3M in annual revenue - seems like at least $75M in revenue for a company that's currently doing under $15M in its paper coatings business which has been challenged by competing against petroleum-based coatings that are much cheaper with low priced oil (for now).

It's taken a long time - but the progress seems clear and commercial validation is approaching - from there the stock price should start to discount future growth and now longer sell for a modest premium to their cash position.

Who nows - they might even start to go out and talk about the stock - they haven't done so because they prefer (rightly so) to focus their efforts on the business - as the share price is not a factor in funding the DuraBind rollout out.

Very much worth a closer look today.