PH and Kwinana doing about the same currently. Jed Styles...

PH and Kwinana doing about the same currently. Jed Styles (Manager, Kwinana) and Brent Robinett (Manager PH) have a monthly "race" to see who can make more money.

They have no major "contracts". They are completely dependent upon opportunistic business that comes up from their clients and what Cleanaway and Orix collect. However: they are seeking major contracts to fund the upgrade of the TDU. Also: they receive waste from a huge number of sources so it balances out. Don't also forget that they have one of two TDUs in the entire country and one of only two kilns used to burn solvents in the country. So: it is not so important if they have contracts or not - polluters have no where else to go. This is the magic of TOX. They have a legislated duopoly, very little capex and working capital, huge barriers to entry, fantastic pricing power, huge revenue/profits per employee, no debt, high growth, operate in a politically friendly area (i.e. proper waste treatment is a good thing even if no-one wants to have them in their back yard) and good management operating the company. For me this is almost the "perfect" company. It deserves to trade at a high premium to the market, albeit it is a small company.

My expectations are that we'll see this trading at 18c upon the proving of them making 1c per share Net at the full year result. The 3rd quarter result may well put them up there, mind you. In July everyone will focus on the expansion plans and also what the company should be able to do in 2007. Which is about 1.5- 1.75cps. On 18x this is 27-30c sort of thing. So say that's what it should be at in July 2007. Now what will people pay in July 2006 for a share expected to be 30c in July 2007? Perhaps more than 18c. So 18-20c in July 2006 is my expectation.

Now the kicker could well be the winning of a large TDU contract. A 40kT contract, by my estimates, could make the company another $3-4m per half year. Thats another 0.6-0.7 cps in earnings or 0.6 *18x = 10c increase in share price if sustained for the whole year (i.e. if yetanother contract is won) or 5c if only one contract per year won. One could add this to the 30c 07/07 expectation.

It's all big numbers. Lovely stuff.

Expect them to trade in the 14-16c range for the next few months...until the 3rd quarter, or until another acquisition is announced.