What is the stock?
Cleanaway Waste Management is a leading provider of waste management and environmental services in Australia. Established in 1987, the company now operates over 200 solids and liquids depots collecting waste from commercial and industrial as well as municipal customers.
How long have you held the stock?
We have held the stock since early 2017.
What do you like about it?
We are attracted to the defensive nature of the waste management industry and future growth prospect of the company. Led by a highly experienced management team, Cleanaway has evolved from offering commoditised waste collection services to a fully integrated national business competing across all major segments of the waste management industry. Its dominant market position has enabled the company to invest more in technology to drive efficiency, further strengthening its market positioning.
In addition to organic growth, the company has a very strong balance sheet that provides flexibility for opportunistic acquisitions. We are comfortable with the management team to drive the acquisitive growth, based on their track record of financial discipline and cash focused KPIs.
How is it better than its competitors?
As a dominant vertically integrated player, Cleanaway has a natural advantage over its competitors. With a strong focus on delivering value to its customers, Cleanaway has been gaining share since the new management team took the helm. As noted earlier, a flexible balance sheet also enables the company to take advantage of strategic acquisition opportunities, whilst most of its large international competitors are capital constrained.
What do you like about its management
Managing director Vik Bansal has been with the business for over two years. Within that time, he has delivered on cost efficiency and repositioned the business in the minds of its customers. He is supported by a team of highly experienced senior executives that are fully aligned with his vision.
What is your target price?
Our target price is $1.60 based on a blend of Discounted Cash Flow method and global peer comparison multiple.
At what point would you sell it?
We will take profit when the share price reaches our target price.
How much has it added to your overall portfolio over the last 12 months?
Since our initial purchase in early 2017, the stock has returned over 20%.
Where do you see value?
The volatility across the equity market is picking up following the sharp sell off in bonds. Whilst most sectors will be under pressure in the current risk-off environment, we are seeing buying opportunities across cyclical sectors such as industrials and resources. These are the companies that will have substantial earnings’ leverage to global economic recovery.
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