article about tox in the oz

http://www.theaustralian.com.au/business/opinion/tox-free-solutions-tox-257/story-e6frg9lo-1225809004629

Tox-free Solutions (TOX) $2.57

THE WA-centric waste manager has been feasting on a succession of big contract wins, most recently Monday's disclosure of a deal - thought to be worth $10 million a year in revenue - to service Rio Tinto's Pilbara iron-ore operations.

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In October Tox won a $30 million-a-year contract with Toll Energy to manage waste from the construction phase of the Gorgon project base on the eco-sensitive Barrow Island.

But has the well-loved stock exhausted itself for the time being? That's the dilemma for rank-and-file Tox holders, who have to decide by next Tuesday whether to cough up for a maximum of $5000 shares at $2.30 under the company's share-purchase plan.

Unusually, broker UBS has departed from the Tox cheer squad and slapped a “sell” call on Tox, although its commentary is constrained. Factoring in the $20m insto placement, the firm simply believes the stock is overvalued.

“There is no change to our investment thesis that Tox is well positioned to benefit from capital expnditure and production activity across the north-west of Australia,” the firm says, adding Tox stock trades on a multiple of close to 20 times forecast 2009-10 earnings.

Wilson HTM (which underwrote the Tox placement) provides the upbeat counter-point: “We continue to believe that tender pipeline and the overall thematic around waste management will result in strong earnings for an extended period of time,” the firm says.

Wilson HTM points to a pipeline of work being tendered or negotiated, for the likes of Aloca, BHP petroleum, Chevron, Woodside and Apache.

Tox is certainly in the right place at the right time: its waste-management facilities at port Hedland and Karratha are the only ones for miles around. But the wildcard is its acquired Barrie Brothers arm, which dragged down 2008-09 earnings for reasons which haven't been adequately explained.

Management points to EBITDA of $28m this year, compared with the previous $23m.

Criterion had Tox as a long-term buy at $1.93 on July 2. Our prognosis is the stock - which tends to get ahead of itself - is a hold at best. But the 10 per cent difference between the SPP price and the Tox market price as at noon should give existing holders the comfort to write the cheque.

Interestingly, Wilson HTM values the stock at only $2.48 (with a $3.04 price target) while the more bearish UBS has increased its price target from $2 to $2.55. Go figure ...