Cleanaway Waste Management Limited (ASX: CWY)

FY20 Half‐Year Results

Cleanaway Waste Management Limited (“Cleanaway”) (ASX: CWY) on 19 February 2020 announced its financial results for the six months ended 31 December 2019

(Graphic Source: Company Reports)

Organic Growth and Margin Expansion

  • Underlying EPS up 15.2%, Interim Dividend up 21% to 2.0c Fully Franked
  • Underlying NPAT (pre AASB16) at $76.2m was up 13.7%
  • Underlying EBIT (pre AASB16) at $125.2m up 6.8% and margin expansion by 70 bps to 11.7%
  • Underlying EBITA (pre AASB16) at $234.6m up 2.5% and margin expansion by 40 bps to 21.9%
  • Net revenue up 0.5% with organic growth offsetting the impact of lower commodities revenue and the introduction of Queensland landfill levies
  • Footprint 2025 Progress: Integration of Toxfree on track; completed SKM acquisition and integration commenced; Plastic Pelletizing MOU confirmed; announced EfW project in Sydney
  • FY20 underlying EBITDA guidance post AASB16 of ~$515m to $525m (Data Source – Company Reports)

Prophet’s Take

The Group’s underlying profit after income tax (attributable to ordinary equity holders) for the half-year ended 31 December 2019 of $75.1 million has increased by 12.3% in the prior period (2018: $66.9 million). The underlying profit increased despite the lower commodity prices for the half and the introduction of the Queensland waste levy which reduced volumes into their Queensland landfill.

Cleanaway is nearing the final stages of the Toxfree integration process and remains on track to deliver $35 million of synergies expected from the acquisition. During the period, Cleanaway successfully tendered for both the City of Casey and the South Australian Council Solutions contracts. Both of these contracts commence on 1 July 2020.

The stock is just at its support level. It has the potential to move higher from here. We reckon that the stock still has substantial upside potential at the current stage on the back of continued expansion, acquisition, and strong fundamentals. We are Bullish on “Cleanaway Waste Management Ltd” and give it a “Hold” recommendation at the current price of $2.27

We are not qualified investment professionals and cannot give specific investment advice. This information is opinion only. It is not intended as financial advice. Prophet is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information contained in this article. Please do your own research. Some information may be out-of-date or inaccurate.

-This is opinion only. This is not investment advice-

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