HAVING ENJOYED some really nice profits from the now delisted Enviroserv, I’ve always had a morbid curiosity about my R1 000 of Interwaste shares. As the only real access point to the potentially lucrative waste management industry it should be worth a punt, but all I’ve seen is my investment steadily whittled down over the last year and a bit.
Trading at 100c three years ago, Interwaste has continued to drop and is now trading at 40c. Not much to get excited about, and its full-year trading results to year-end December 2010 were also a bit of a mixed bag, with management even terming them a “disappointment”. In short, its results were a bit messy, with a fair number of impairments and overstatements being put through. Interwaste says its financial controls weren’t up to scratch and it’s bolstered the team. But at some point you’re going to start wondering when those things are going to stop cropping up. Since listing in 2007 it’s stumbled around in the dark and those investors still left are probably hoping for a drama-free 2011.
So what are its interesting lines? With revenue of R442m and gross profit of R152m it’s a business with fat in its margin and something that could be ratcheted upwards on volumes. Second, at a tangible net asset value of 57c/share you can buy the share at a discount. Net asset value is 71c/share, and that’s post the write-down of some property assets.
Its cash and cash-flow positions are improving, but when you’re pushing through R440m in revenue and delivering a decent number on the gross profit line you should be doing a bit better than just R9m in the bank. Throw in R47m in interest-bearing liabilities, with interest rates scheduled to rise and another R18,9m in deferred tax liability, and you start to appreciate what happens when you get your listing wrong.
It’s a tentative “buy” – but management needs to start pulling things together because investors have lost patience.