tox a buy rating - poised for rapid growth

Couldnt find anything with reference to this on the thread - a good read: http://www.intersuisse.com.au/Files/industrial/tox%20free%20solutions%20-%20intersuisse%20-%2010%20august%202009.pdf

Tox Free Solutions Limited TOX Monday 10 August 2009
- Intersuisse - Focused expansion has positioned TOX well for rapid profit growth

Recommendation: Buy

Investment Rationale
TOX listed in September 2000. Revenues grew rapidly from $12m in FY06 to
$34m in FY08. TOX has developed an integrated facility on an 8ha site at
Kwinana to service waste streams from the shire and oil & gas, mining and
processing industries from the Burrup Peninsula to the Pilbara. This has
formed the blueprint for like facilities around Australia. These include the Port
Hedland industrial waste incinerator and the Kwinana toxic and hazardous
waste facility, among the very few licenced: long lead times and hurdles for
licensing create barriers to entry. With acquisitions, TOX operated five licensed
waste management and industrial services sites, adding Kimberley, Kalgoorlie
and Henderson, and a liquid waste in Brisbane. In 2008, TOX acquired
Karratha Mini Skips to complement its facility there, and Barry Bros adding ten
waste collection operations on the east coast of Australia.
Barry Bros. does sewer cleaning, high pressure water cleaning, waste water
recycling / reclamation, vacuum loading and waste management from three
Queensland, two NSW, four Victorian facilities and one in SA. It was expected
to add $8m pa to EBITDA. Plant and equipment was valued at over $20m. Late
in 2008, TOX opened a licenced hazardous waste management facility at St
Mary’s, Sydney and raised $13m in a placement at $1.40. In February 2009,
TOX won a three-year plus contract for Woodside’s LNG facility, Karratha
Supply Base and offshore facilities.
TOX is building a strong customer-focused position in a growth market.
Event
�� We reviewed the 1H09 results on 15 April (Buy at $1.54). Since then the
price has risen 36%, but progress continues with integration of Barry Bros.
and new facilities and a focus on cash generation and disciplined growth.
�� TOX reported record revenue of $8.6m and $2.5m EBITDA for the month
of March. All divisions performed well with strong results at Kwinana, Port
Hedland, Henderson and Barry Bros.’ Brisbane and Sydney operations. It
started its waste management services contract for Woodside. TOX now
has 350 staff across 24 operations Australia wide.
�� TOX expected to finish FY09 strongly, but in February the Victorian bush
fires impacted Barry Bros. for two weeks and August 2008 guidance of
$26m EBITDA was cut back to $22-24m, also attributed to delays in the
commissioning of the new NSW hazardous waste facility and the new
Karratha site, downturn in commodities effecting Kalgoorlie operations,
and investment in overhead and management systems for growth.
�� TOX retained a number of local government waste management contracts
across the Kimberley regions, worth in excess of $15m over eight years.
�� Toll (TOL) has agreed with Chevron to manage the Barrow Island Supply
Base and Logistics Services contract for the Gorgon Project, TOX has an
MOU to provide TOL with the included waste management services.
Impact
EBITDA in 1H09 was $10.1m. The second half is historically stronger,
earnings split about 40:60. FY10 should see
�� Further integration synergies including expansion of Barry Bros. industrial
services within WA
�� Full year contribution from the Karratha facility, started February 2009
�� Improved performance from St Marys; upgrade of NSW and Qld facilities
�� Contribution from the Woodside total waste management contract
�� Expansion of Emergency Response services Australia wide
�� Major waste management and industrial service contracts being tendered.
Recommendation Impact
Buy as, after strong acquisition and organic growth and its integration and
consolidation, TOX is poised for rapid revenue / profit growth.