Clean­ing up

Finweek English Edition - - Companies & markets - MICHAEL COUL­SON

IT’S AP­PRO­PRI­ATE THAT En­vi­roServ uses a green un­der­lay to its re­sults an­nounce­ment to stress its en­vi­ron­men­tal cre­den­tials. Green also stands for go, and En­vi­roServ (for­merly Wastetech), which listed on the JSE in 1966, has cer­tainly been go­ing great guns.

Head­line earn­ings per share for the first half of the fi­nan­cial year – the six months to De­cem­ber 2006 – have in­creased from 10c in 1999 to 35c in 2006. For the full fi­nan­cial years to June, be­tween 1999 and 2006 HEPS rose from 20c to 67c and dis­tri­bu­tion from 5c to 21c.

Dis­pos­ing of haz­ardous in­dus­trial waste is its main busi­ness. In­creased waste vol­umes have ac­com­pa­nied strong growth in key mar­ket sec­tors: chem­i­cals & oils, in­dus­trial met­als and min­ing. En­vi­roServ man­aged to off­set in­fla­tion­linked costs by ef­fi­ciency gains on a higher turnover, main­tain­ing its mar­gins.

Ex­pan­sion has been largely or­ganic and do­mes­tic, but an An­golan op­er­a­tion set up a cou­ple of years ago is now self-sup­port­ing. A busi­ness has also been opened in Mozam­bique and a base set up in Qatar to ex­plore op­por­tu­ni­ties in the Gulf, while last Oc­to­ber a 51% stake was bought in Burma Plant Hire, which has sup­plied En­vi­roServ in the Cape for some years.

En­vi­roServ has a BBB (black in­flu­enced) rat­ing from Em­pow­erdex and is in­ves­ti­gat­ing ways of lift­ing its em­pow­er­ment own­er­ship to 25%.

En­vi­roServ says the latest fig­ures are a solid foun­da­tion for growth for the rest of its fi­nan­cial year. Two ma­jor ar­eas for fu­ture growth are in­ter­na­tional ex­pan­sion in coun­tries that are po­lit­i­cally stable, have hard cur­ren­cies and can use the group’s skills and the de­vel­op­ment of waste ben­e­fi­ci­a­tion pro­cesses. A num­ber of pos­si­ble con­ver­sions of waste ma­te­ri­als into saleable prod­ucts have been iden­ti­fied.

It’s the only listed com­pany that spe­cialises in waste dis­posal, an ex­pand­ing busi­ness as heavy in­dus­tries, in par­tic­u­lar, face in­creas­ingly stri­dent calls to clean up their acts. It has an en­vi­able record, with ev­ery rea­son to ex­pect that to con­tinue.

At 1 060c/share, the price has more than dou­bled since mid-2006. That’s taken mar­ket cap above R1bn, the tra­di­tional grad­u­a­tion from small cap to medium cap, and it’s now R1,3bn. If first-half growth can be sus­tained, 12-month HEPS could be be­tween 90c and 95c, with an an­nual div­i­dend of around 29c. That’s equiv­a­lent to a for­ward price: earn­ings of about 11,5 and a yield of 2,7%, which looks like good value.

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