After having a bit of a look see at the Tox F/Y and comparing it...

After having a bit of a look see at the Tox F/Y and comparing it with the 1/2 year, in particular the segmental breakdown I came up with the following:

Toxic & Hazardous Waste Remediation (ie Kwinana)

1st 1/2 (824) 2nd 1/2 166 F\Y (658)

Non Hazardous waster Remediation (ie Port Hedland)

1st 1/2 587 2nd 1/2 1427 F\Y 2014

Tank Cleaning Business

1st 1/2 (788) 2nd 1/2 111 F\Y (677)

Unallocated Corporate Overheads

1st 1/2 (691) 2nd 1/2 (214) F\Y (905)

Total result F\Y (226)

What can be seen from stripping out the 2nd 1/2 results from the full year is management has now got (probably for the first time ever) all 3 divisions working profitably.
In fact the Port Hedland's profitability improved 143% (ie firecracker) in the second half when compared to the first. They have finally got Kwinana turned around and even the tank cleaning division turned a profit in the 2nd 1/2. This is important is it makes the tank division more attractive to a potential buyer and makes a rapid sale at a reasonable price more likely (ie More cash in the bank for TOX)

Encouragingly, corporate overheads were significantly down by $477k in the second half, this was probably because of one off costs incurred in the 1st half due to the rights issue, booting out of old management, and general sorting out of the company. All though I would hope that they could remain at this level, generally management likes to reward themselves when they turn a company around (and fair enough too) and there will be costs associated with seeking out of expansion opportunities etc.

One Note to all of this is that there was no mention of how the asset writedowns were spread amongst each segment which could have the effect of overstating or understating each segment comparison (remember the writeoffs were done in the first 1/2). But it should match out at the bottom line level.

Also I am not sure if there is seaonality in any of the business but you would think not.

So to sum up, if you look at the 2nd 1/2 Tox made $1.490m which, of course, is very close to what they already told us (ie $1.450m). Note that their forecast for 2005/06 was for $3m EBITDA. So I think they are being VERY conservative (remember how many times they stressed "base case") when you consider all they would need to do is earn what they did for the 2nd 1/2 for the next two 1/2's and they would earn $2.98m BOTTOM LINE ie This would indicate a EBITDA somewhere north of $3m EBITDA. (in one word - upgrade)

Add in the effect of $3m extra in the bank come February with option maturity and the sale of the tank division (say $500 - $700k) the company will have Net cash (ie no debt), strong operating cashflows, and significant brownfields (ie improved plant performance) expansion opportunities. All for a company that if it earnings remain constant with the last 1/2's, is on a foward P/E fully diluted of 11.7x (base case remember people - base case)

Now considering current management's record of under promising and over-delivering (by over 100% in the 2nd 1/2 but I am not suggesting an upgrade of THAT magnitude), is it not possible that they may do just a little bit better than that?

Anyhow just my (hopefully well considered) thoughts, please feel free to point out any inaccuracies/mistakes I may have made, I'll appreciate the feedback.

Cheers

J.