“you smell it before you see it”€¦ · 18.4% + 4.26% of div yield scenario #1 if you invest...
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“YOU SMELL IT
BEFORE YOU SEE IT”
DISCLAIMER
Mind Kinesis Investments Pte Ltd & Value Investing Academy is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information provided in these notes represent a recommendation to buy or sell a security.
In no event shall Mind Kinesis Investments Pte Ltd & Value Investing Academy be liable to any participants, guest or third party for any damages of any kind arising out of the use of any content shared here including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages.
Past performance is a poor indicator of future performance. The information on this presentation is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way.
DISCLAIMER
Please note that this case study was shared during World Value
Investing Fest in July 2015 in an exclusive workshop called “Invest with
Mary Buffett” in front of about 80 participants. Ms Mary Buffett was the
Key Note Speaker as well as other Value Investors.
800 SUPER HOLDINGS
LTD
BY CAYDEN CHANG, MIND KINESIS VALUE
INVESTING ACADEMY
AGENDA
1. Why waste management?
2. Strategies for waste management
3. Who are the Public Waste Collectors
(PWCs)?
4. Case Study
5. Management
6. Valuation
1. WHY WASTE
MANAGEMENT
2. STRATEGIES
FOR WASTE
MANAGEMENT
3. WHO ARE
THE PUBLIC
WASTE
COLLECTORS?
800 Super Holdings Ltd (5TG.SI) Colex Holdings Limited (567.SI)
Sembcorp Industries Limited (U96.SI) Veolia ES Singapore
Industrial Pte Ltd
4. CASE STUDY
WHAT BUSINESS
WHAT BUSINESS
1) Integrated Public
Cleaning
2) Contract Cleaning
WHAT BUSINESS
1) WASTE & RECYCLING MANAGEMENT SERVICES
• Re-awarded a public waste collection contract for a period of 7 years and 9 months
commencing from 1 January 2014 to provide waste collection services for the
residential and trade premises in the Ang Mo Kio – Toa Payoh sector.
• Provide recycling services to complement our waste collection services. These
recyclable materials are then separated, compacted and packed into bales, which are
then sold to local and overseas customers, providing another source of income
for the Company.
WHAT BUSINESS (MARKET STRUCTURE)
Waste management market structure in Singapore is an oligopoly
between four Public Waste Collectors (PWCs). PWCs are
appointed by NEA. The four players in the market are outlined in the
following table. With the exception of Veolia ES Singapore Pte Ltd, the
Parent Company of the other three players are listed on the
Singapore Exchange.
WHAT BUSINESS
2) CLEANING AND CONSERVACY SERVICES
(a) INTEGRATED PUBLIC CLEANING SERVICES
• In February and July 2014, we were awarded two contracts to provide integrated public
cleaning (IPC) services for the North-west and South-west region of Singapore for 6 years and
seven 7 years respectively. The IPC contract for the North-west of Singapore commenced on 1
April 2014 while the IPC contract for the South-west region of Singapore commenced on 1
September 2014.
• Both IPC contracts provide cleansing services which cover roads, pedestrian thoroughfares,
carparks, parks, drains, beaches, shorelines and waterways.
(b) CONTRACT CLEANING SERVICES
We clean external facades and interior of buildings as part of our contract cleaning and
conservancy services. Our contract cleaning services are provided to residential, commercial,
industrial and institutional customers.
WHAT BUSINESS (MARKET STRUCTURE)
IPC contracts are managed and tendered by NEA. The industry is
also an oligopoly between five service providers listed below.
WHAT BUSINESS
3) HORTICULTURAL SERVICES
Our horticultural services include grass-cutting, planning and maintenance of landscape
and aboricultural services that include the planting and pruning of trees and plants. These
services are provided to schools, commercial customers, government departments and
statutory bodies.
WHERE ARE THEIR
BUSINESSES?
WHAT TYPE OF COMPANY?
TYPE OF COMPANY
MEDIUM GROWTH COMPANY!
PAYS DIVIDEND
Dividend Yield = Annual Dividends/Stock Price
ANY DIVIDEND SINCE GROWTH
IS NOT THAT GREAT?
Why the dividend yield falls about 50%?
Dividend Yield = Annual Dividends/Stock Price
FUTURE PLANS
MRF =
Recycling
Facility
FUTURE PLANS 1. 4 Incineration Plant in Singapore
2. Waster incinerated and steam is used to produce steam in boilers,
which is then used to drive turbines to produce electricity.
3. Refuse collection vehicles arriving at the WTE (Waster-to-Energy)
plants are first weighed on a weighbridge. The vehicles are weighed
again after they discharge the waste. The before-and-after weighing
process allows the WTE plant to track the amount of waste being
brought for incineration.
4. Possible benefits: 1) Reduce costs in waste disposal, 2) Extra revenue
is disposing other companies’ wastes
GROWING AMOUNT OF WASTE
vc
POSSIBLE ECONOMIC MOAT
(FOR NEXT 6 YEARS)
1. Licensing – License by NEA
(National Environment Agency)
2. Toll-Bridge
PREDICTABLE EPS?
MARGINS
CASH FLOW FROM OPERATIONS?
ROE, ROA
C
C
DEBT?
#8A: S.W.O.T
Strengths:
1. Long-time player with over 20-years' experience in waste management.
Diversified pool of customers from both private and public sector.
2. Diversified range of services with forward integration to Material Recovery
Facilities (MRF).
3. Already have two MRFs in place, getting paid to collect recyclable
material, and selling the material after sorting. A third MRF is under
construction.
Weaknesses:
1. Opportunities are restricted as currently operating predominantly within
Singapore.
2. Difficulty in hiring manpower for waste management industry.
#8A: S.W.O.T
Opportunities
1. Population growth leading to development of more residential and
commercial areas, thus requiring refuse collection and cleaning services.
2. Economic growth leading to higher disposable income and greater
propensity for consumption, resulting in replacement of consumer goods
and increased waste generation.
3. Government initiatives raising environmental awareness, leading to more
recycling of waste.
Threats
1. Unsuccessful in renewing existing contracts or gaining new contracts.
2. Shift in Government policy to allow more competition into the industry.
Increase in labour cost, affecting profitability.
5. MANAGEMENT
Exec Chairman
CEO Brother of Chairman & CEO
Sister of Chairman & CEO
Brother of Chairman & CEO
Exec Chairman
CEO
6. VALUATION
UNDERVALUE?
Scenario #2
If you invest at $0.5060
Potential Upside for the next 6 Years:
18.4% + 4.26% of Div Yield
Scenario #1
If you invest at $0.5783
Potential Upside for the next 6 Years:
4.1% + 4.26% of Div Yield
Potential Downside:
Might take place after 6 Years
Estimated Intrinsic Value Range: $0.5060 - $0.5783
DISCLAIMER
Mind Kinesis Investments Pte Ltd & Value Investing Academy is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information provided in these notes represent a recommendation to buy or sell a security.
In no event shall Mind Kinesis Investments Pte Ltd & Value Investing Academy be liable to any participants, guest or third party for any damages of any kind arising out of the use of any content shared here including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages.
Past performance is a poor indicator of future performance. The information on this presentation is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way.
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