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re: tox in australian today As promised.

The Australian
Edition 1 - All-round CountryTHU 30 MAR 2006, Page 029
CRITERION
By Tim Boreham


Tox Free Solutions (TOX)
WHILE Transpacific and Waste Management NZ propose to combine their dumpsters to create a formidable trans-Tasman force, a smaller Perth-based rival has staged a remarkable recovery from the penny dreadful scrapheap.
In May last year, Tox shares hit a 1.9c nadir, reflecting contract losses and earlier problems at the company's Kwinana soil contamination treatment plant.
Tox posted a $3.8 million loss in 2002-03 and a further $2.2 million deficit in 2003-04. A big operational shake-up ensued and the company's now out of the poo: in the December half it posted EBITDA of $2 million and it's producing free cash flow of close to $400,000 per month.
Under new management, Tox has left its woes well in the past, but still hasn't been forgiven by some investors. Initial punters, including the late Rene Rivkin, took a bath as the stock plunged from its 50c-a-share listing value in November 2000.
Now, Tox stock is well worth a look as a consolidation play in its own right, as a takeover target or as a stand-alone proposition.
A key attraction is that Tox operates one of only two incinerators licensed to process highly hazardous wastes, at Port Hedland (the other is in South Australia). The barriers to entry are high because obtaining an operating licence can take years.
``We are the only game in town,'' says Tox chairman Ian Burton.
In Port Hedland, Tox is cashing in on the resources boom, which produces thousands of tonnes of nasty by-products. Clients include BHP, Rio Tinto, Woodside and Sally Malay.
Tox has also proved adept at acquiring add-on businesses, last year picking up tank-cleaning operation Delvex Industrial Cleaning for $2.5 million. Struck on a multiple of about four times EBITDA, the purchase was about half as expensive as Transpacific's Waste Management NZ tilt.
A similar acquisition is understood to be imminent.
While Tox Free has flagged current year EBITDA of $4.4 million, Wilson HTM expects a more generous $5 million and reported earnings per share of 0.8c.
The firm says: ``Tox has completed a major turnaround of operations and is now enjoying strong growth in a dynamic industry with natural barriers to entry and lateral exposure to the booming resources sector.''
Some Tox-watchers expect upgraded guidance with next month's March quarter update.
So far, the biggest winners from Tox have been the investors who punted on a November 2004 rights issue, with attached options at a strike price of 3c.
The options were exercisable at the end of January and (unsurprisingly) many have taken their 300 per cent-plus profits and run.
One of Criterion's uber-cynical acquaintances warns never to get carried away about companies bearing an 08 (Perth) or 07 (Brisbane/Gold Coast) prefix on their phone numbers.
But Tox looks to be in a strong position both strategically and financially (it has cash of $3 million and no debt), so we'll ignore this counsel and rate the stock a LONG-TERM BUY.