CWY - Cleanaway Waste Management

[sptrawler]

I am just curious the people on this thread who are buying the stock are not concerned with the massive capital intensity and persistent low returns on equity of the company?

I did take a small position, reasoning being, at present councils are having to deal with the problem and they wont want to.
Therefore the problem will be moved to a third party, as is the way.
Cleanaway are in a position to capitalise on the shifting of responsibility, as history repeats.
Just my opinion.

 

[Value Hunter]

Sptrawler so by what mechanism do you expect increased revenues flowing from the councils to Cleanaway to increase the return on equity of the company? Can you make a logical case backed by evidence for increased scale boosting the return on equity of clean-away? Or perhaps the margins on council contracts would be higher? Is there evidence for that?

Growth does not really benefit the investor long term if its occurring at 6 - 8% incremental returns on equity.

 

[Knobby22]

I don't own but surely in this low interest rate environment future EPS is the important factor, Value Hunter.

There is a step change happening in this area where recyclables cannot be exported easily. Government will need to do various actions to support investment, improve the quality of the collection material and provide a market for the output.

Also a competitor has been removed which should increase margins.

So the question is how well will government perform to improve the situation and will Cleanaway be able to take advantage.

I am interested in hearing more details regarding your ROE thoughts.
To me it is an historical metric though I suppose what you are saying is that in this business the growth is low compared to others due to the capital required.

 

[So_Cynical]

Rubbish is a low margin business, one of the big changes to come is incinerating the plastics to produce power like they do
in some parts of Europe, the plastics fuel special power plants and they call it recycling cos its turned into power not wasted.

 

[sptrawler]

Rubbish is a low margin business, one of the big changes to come is incinerating the plastics to produce power like they do
in some parts of Europe, the plastics fuel special power plants and they call it recycling cos its turned into power not wasted.

Along this very line So Cynical, when it was first announced, I thought here we go another project that the left will can, but since it was announced a lot has happened in the waste management space.
Due to the issue of not being able to offshore our rubbish, initiatives like the one So Cynical mentioned will have to be developed, there is no other option, so CWY is placed to take an early lead in a space not many will want to move into.
Actually if you look further back in the the Value Hunter, I was saying the very things you mentioned, since then the waste management area has become a minefield for the Government that has to be addressed.
I do know my local council is sending bin inspectors around early morning, to ensure that the correct bin is being used, you know when that is happening it is starting to get serious.
Just my opinion.

https://www.cleanaway.com.au/sustainable-future/energy-from-waste-project-western-sydney/

 

[qldfrog]

Burning waste for heat is great in colder country where you can have water heated communal system, it is a pretty bad fuel if you want to get electricity
It is also terribly polluting..so not a miracle solution, even worse for our hot country

 

[sptrawler]

Burning waste for heat is great in colder country where you can have water heated communal system, it is a pretty bad fuel if you want to get electricity
It is also terribly polluting..so not a miracle solution, even worse for our hot country

They will have to use some form of scrubbers for the stack emissions, but it really isn't a case of well it isn't good, it will be a case of we don't have many options.IMO
They no doubt will introduce laws to reduce the use of non recyclable products, but it will take time to have an effect, until then they can't just keep burying it.

 

[So_Cynical]

Burning waste for heat is great in colder country where you can have water heated communal system, it is a pretty bad fuel if you want to get electricity
It is also terribly polluting..so not a miracle solution, even worse for our hot country

They burn it in europe because the only other options are to export it or bury it, sure they also produce hot
water and yep it's not super efficient at power production, but it's a case of do something with it or bury it.

 

[sptrawler]

They burn it in europe because the only other options are to export it or bury it, sure they also produce hot
water and yep it's not super efficient at power production, but it's a case of do something with it or bury it.

I think the push to address the waste problem, is only just starting, but as with most other things the momentum will accelerate quickly due to the 'connected' World.
Unfortunately, I don't think the Government will be able to just outsource the problem, as you say there isn't a lot of money in it, so it will have to be subsidised. IMO
Therefore whoever is best placed to provide the service, with the minimum of fuss, will get the contract. The problem is that big, it may end up a quasi Government company.
Just my thoughts.

 

[Smurf1976]

They burn it in europe because the only other options are to export it or bury it, sure they also produce hot
water and yep it's not super efficient at power production, but it's a case of do something with it or bury it.

In terms of power it has efficiency downsides but ultimately it does work and efficiency is of course one of those things that's relative. However inefficiently it produces power, it still produces it more efficiently than if it's not used at all. Something is better than nothing.

There's a large industry in Victoria which has plans to burn rubbish to produce steam to run the factory with by the way. That's another possible end use.

In terms of the acceptability of it, well there's rubbish incineration (for power) done within metropolitan London so I'd assume they have some reasonably strict requirements which are being met. No idea what company but it's done as such so it's possible to make it work in a large city situation.

As for the stock - I do not hold at present.

 

[qldfrog]

From what i remember of discussion article i read decades ago on a rubbish burning plant in France, they were actually mixing the rubbish material with oul/diesel so it was not that great, and you needed to manage the rubbish..aka mix to try to ensure it was running hot enough
From what i have read, it is not a favoured solution in europe anymore
But Australia is always keen to be 20y behind and repeating errors so they will soon be around , transforming durable plastic captured carbon into CO2, in a moved pushed by the green
Real scientific minds, once past the crying and despair phase, have a lot to laught at
So when will CWY build a waste burning plant

 

[So_Cynical]

So when will CWY build a waste burning plant

Soon, they have a site in western Sydney and Macquarie has provided the finance, i think it's now
in the consultation and planning stage...local residents are on board.
~
https://7news.com.au/news/environment/waste-for-power-plant-plan-for-west-sydney-c-485092
~

 

[sptrawler]

Like I said a few posts back, it is an issue we can't dodge and one not many want to take on.
It may be an opportunity? Who knows.
But gearing up with side loader trucks and dispatch facilities is costly, CWY has both and in most cases are fully integrated with council waste management, so I think everything is coming to a head and CWY are well positioned.
https://www.smh.com.au/politics/fed...cycling-fund-after-delay-20191214-p53jzq.html
I do hold CWY.

 

[sptrawler]

On the very same subject, but a bit of core, my mate who is a recycling technician(garbo), says the main issue with all this is people don't clean out their recycling items or take off the tops.
That is the glass pickle jar isn't washed out and has its metal top screwed back on, well one is glas the other is metal, DUH.
Well the council he works for has started sending out scouters, to check the bins, one would think this is a precurser to something else IMO.
But everyone to their own.

 

[sptrawler]

W.A Government to step in with cash to help keep recycling going in Perth. While cleanaway rebuild their facility.

https://www.abc.net.au/news/2020-02...vernment-scrambling-to-stop-landfill/11938048

I do hold.

 

[Dona Ferentes]

Like I said a few posts back, it is an issue we can't dodge and one not many want to take on.

How true is that?!

It may be an opportunity? Who knows..

But the pointy end want subsidies. Rent seekers with a twist of eco-extortion?

(not saying it's CWY, btw)

 

[sptrawler]

How true is that?!But the pointy end want subsidies. Rent seekers with a twist of eco-extortion?

(not saying it's CWY, btw)

This is the whole issue with the myriad of issues, relating to climate change and waste management, once the Government sets the agenda in most cases the tax payer is locked and loaded to pay for it.

 

[Dona Ferentes]

This is the whole issue with the myriad of issues .... in most cases the tax payer is locked [in]

all cases, really. But it's the equable arrangement that counts. Checks and balances. Realistically, user pays ( = consumer). Involving the Taxpayer is a social readjustment.

 

[sptrawler]

all cases, really. But it's the equable arrangement that counts. Checks and balances. Realistically, user pays ( = consumer). Involving the Taxpayer is a social readjustment.

That is how it is meant to be, the sliding scale of readjustment is always the issue.

 

[bigdog]

ASX announcement today and up 13.02% (best ASX 200)

For the six months ended December 31, Cleanaway reported a 4.1% increase in net revenue to $1,197.2 million and a 13.7% lift in underlying net profit after tax to $76.2 million. Underlying earnings per share came in 15.2% higher at 3.8 cents per share. This was driven largely by its Liquid Waste & Health Services business, which delivered a 15% jump in EBITDA.

Full Year
Management advised that it expects to deliver stronger earnings growth in the second half. Earnings are expected to be up on both the first half of FY 2020 and the second half of FY 2019.

As a result, it is targeting underlying EBITDA (post AASB16) of $515 million to $525 million. This includes a $43 million to $45 million positive impact from AASB16. In FY 2019 Cleanaway posted underlying EBITDA of $461.6 million (pre AASB16).

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