Colex Holdings Ltd is a company which I think has strong financial fundamentals. However, the issue with this company is its narrative and future outlook / growth (as compared to other companies with exposure to overseas markets).
It is one of the waste management companies listed in the Singapore Exchange. Other waste management companies listed in Singapore Exchange include 800 SuperHoldings Limited (SGX: 5TG) and Sembcorp Industries Limited (SGX: U96). A fourth company, Veolia ES Singapore Pte Ltd, is not listed. SembWaste Pte Ltd is currently the largest solid waste management provider in Singapore.
I note the following from the Colex 2014 Annual Report:
- In 1999, Colex acquired Integrated Property Management Pte Ltd (“IPM”) and with this acquisition, Colex’s activities were extended to include contract cleaning of commercial, industrial and residential buildings.
- On 2 December 2014, CEPL installed the Material Recovery Facility to sort out recyclable items from the municipal waste collection and the industrial and commercial waste business.
- Colex Environmental Pte Ltd completed the installation and commenced the usage of the material recovery facility in December 2014 for sorting the recyclables from the industrial, commercial and public waste collection.
When I read the Corporate Profiles of the 4 Public Waste Companies (PWC) in Singapore (read here), Colex seems to stand out for the following reasons (while at least compared to 800 Super):
- Colex specializes in waste disposal for a wide portfolio of clients including commercial offices, shopping complexes, food courts, cineplexes, residential buildings and warehouses.
In the case of 800 Super, their waste collection services are provided to designated areas within the Ang Mo Kio−Toa Payoh sector, which comprise public housing estates, shop houses, trade premises, landed residential premises, as well as private apartments and condominiums which have opted through NEA to engage their services.
Their industrial and commercial waste collection services also span across various industries including shopping complexes, hotels, factories, shipyards, etc (read here).
Basically both Colex and 800 Super offer similar services within similar segments.
I noticed in the Annual Reports and Quarterly Reports, there is no break-down of the revenue / profits base on Residential / Industrial / Commercial etc. So it is hard to gauge if there is an exponential upward trend in the industrial and commercial segments.
Peter Lynch classifies all stocks into roughly 6 categories: slow growers, stalwarts (mid-growers), fast growers, cyclicals, asset plays, and turnarounds. He particularly like “Fast Growers”. Although I may not classify Colex as a Fast Grower – but he mentioned that there can be a fast-growing company in a slow-growing industry as well. In addition, he highlighted that the balance sheet of these fast growers should be good (with little or no debt to fuel the expansion).
Waste Management in Singapore is a small, confined and a very slow growing industry. I find that Colex and 800 Super both have good financial fundamentals, but Colex has an edge due to its low or negligible debt. It may not have a compelling growth story in a fast growing industry neither is it in a huge market. However, if it is able to cannibalize / take over the market shares of the other dominant players in this small slow growing market (due to its better management or service) or even expand into the other segments (eg. commercial) in its wide portfolio – the growth potential will be good.
After all Colex is starting from a very low base. Colex Holdings Ltd‘s market capitalisation is S$39.76mil. 800 SuperHoldings Limited’s market capitalisation is S$84.04mil & Sembcorp Industries Limited’s market capitalisation is S$6.27bil.
Another thing I like about Colex (also other waste management company in that matter) is that they always re-contract their existing contracts with higher value. This thing alone contributes to its growth. But of course it would be better if they can expand to other segments as you mentioned. And also the continues development of Jurong.
“Our industrial and commercial waste collection services span across various industries including shopping complexes, hotels, factories, shipyards, etc. We assess your operations and waste stream and customise suitable waste pickup and recycling programs that is tailored to your needs”
Thanks for highlighting – have changed that portion in my post. Missed that portion out. Guess Colex and 800 Super operates in almost similar segments.