investing in greenfield operations
for the future.”
For instance it costs R80 million
to develop a landfill site; and R20
million to acquire the technology
for a refuse derived fuel (RDF)
facility. At any given moment
Interwaste has about five greenfield
projects underway.
“The man in the middle is the price
taker, higher margins are earned
if you own the landfill, RDF, or
recovery facility because these are
in short supply,” says Jason McNeil,
sales director.
The company’s earnings have risen
from a headline loss of 1.48cps in
2011 to earnings of 11.3cps in the
2014 financial year. Its share has
moved in tandem with the earnings
improvement from a low of 35c in
2011 to 122c currently.
The recent dip in the share price
reflects the lack of liquidity in the
small cap sector and generally
poor sentiment in South Africa,
says Hubbard.
Source: Bloomberg
22
ISSUE 4 – JULY 2015
Over a longer period Interwaste has
outperformed the Alsi as seen in
the chart below. The current PE of
the Alsi is 19.7x versus Interwaste
at 11x. “The valuations within the
small cap universe are becoming
particularly cheap relative to the
larger cap stocks,” he says.
In the case of Unilever, Interwaste
worked with Unilever’s process
engineers to reduce waste-tolandfill as well as the actual amount
of waste produced. “It sounds
counter-intuitive, as if we are
cannibalizing our own business,”