800 Super

[karlmarx]

No jump in earnings, but final dividends increased from 2.5 cents in FY16 to 3 cents in FY17. Including the 1 cent interim dividend, this brings the total dividend in FY17 to 4 cents. This gives a dividend yield of 3.4%, based on $1.18 share price, and represents a payout ratio of 42%, based on EPS of 9.58 cents.

As the WTE is projected to be operational by year end, the earliest we can see any contribution from it is probably in its 2Q18 results. Much capital has been invested into the WTE and if it is successful in raising profits substantially, there may be a re-rating in its p/e ratio as its business more utility-like. And quite certainly, dividends will be raised as management has demonstrated its willingness to increase payout ratio.

Until then, I think shareholders can just wait for their interim dividend in 1QFY18. It should be the same amount as the 1 cent distributed this year.

http://infopub.sgx.com/FileOpen/Q4%20201...eID=468375

Borrowings History
2011: $6m
2012: $6m
2013: $20m
2014: $25m
2015: $43m
2016: $46m
2017: $52m

Core Profit History
2008: $2.2m
2009: $3.4m
2010: $5.2m
2011: $4.6m
2012: $5.9m
2013: $5.7m
2014: $8.9m
2015: $12.2m
2016: $16.7m
2017: $17.1m

Dividends History
2011: 0.5 cent
2012: 1 cent
2013: 1 cent
2014: 1 cent
2015: 2 cent
2016: 2.25 cent
2017: 4 cent

[karlmarx]

The tender to provide waste management services to the Pasir-Ris and Bedok sector has recently closed, and its bids can now be seen from the gebiz website.

800 super has the lowest bid ($193m) among the 8 respondents; significantly lower than the bids from incumbent SCI ($221m) and Veolia ($266m), and 10% lower than the next lowest bidder Alba Group. Clearly, they were very aggressive in their desire to win the bid.

If 800 Super wins the contract, there will be a lot of work required to ensure the efficiency of operations make up for the lost margins from the low bid. 


800 SUPER WASTE MANAGEMENT PTE LTD     193,534,186.40 (SGD)

ALBA GROUP PLC & CO. KG                                        211,311,680.20 (SGD)

AVERDA INTERNATIONAL LIMITED                          237,843,895.00 (SGD)

COLEX ENVIRONMENTAL PTE. LTD.                         221,955,506.32 (SGD)

RAMKY CLEANTECH SERVICES PTE. LTD.               326,788,067.36 (SGD)

SEMBWASTE PTE. LTD.                                                  221,113,612.80 (SGD)

VEOLIA ES SINGAPORE PTE. LTD.                              266,819,795.28 (SGD)

WAH & HUA PTE LTD                                                     264,000,917.10 (SGD)

[karlmarx]

800 Super continues on its push for growth with a proposed $5m acquisition of a laundry business with an NTA of $1.2m, located near its main office in Senoko. The profitability of the laundry business has not been revealed.

http://infopub.sgx.com/FileOpen/800%20Su...eID=472871

In other news, a new Independent Director Mr Mah How Soon will be appointed to the board and chair the nominating committee, subject to shareholder approval. Mr Mah is Managing Director at RHT Capital. According to the bio on RHT's website, 'He has played a key role in advising companies from many industries and countries on a wide range of transactions relating to both equity capital markets, and mergers and acquisitions.'

800 Super looking to raise equity to fund acquisitions?

https://www.rhtcap.com/our-team

http://infopub.sgx.com/FileOpen/800%20Su...eID=473107

[karlmarx]

New areas of growth for public waste collectors?

THU, FEB 01, 2018
New e-waste disposal rules to come for electronic goods producers and possibly retailers in Singapore

THE Singapore government will be requiring electronic goods producers and possibly even retailers to collect the products they sell and ensure that they are recycled or disposed of properly.

Under such an approach known as Extended Producer Responsibility (EPR), the government will set collection targets for these companies, which if not met could attract fines, said Minister for the Environment and Water Resources Masagos Zulkifli on Thursday.

But there will be a transition period given for these companies, he told reporters on the sidelines of a public consultation session on electronic waste (e-waste).

"They will probably have smaller targets first to get the process in place... From the lessons we have learnt from other countries, we have to slowly bring it up. And as the system gets better oiled, we know that they can be very successful," he said.

He added that the EPR concept is already practised in many countries around the world, so most producers are aware of how it can and ought to be done. "Therefore it's not too difficult for them to start doing it in Singapore too."

Singapore is looking at regulation for the sector in order to manage growing e-waste.

More than 60,000 tonnes of e-waste are generated in Singapore each year, with the industrial and residential sectors contributing evenly. This figure is growing 5 per cent every year, according to the National Environment Agency (NEA).

A recent study by the United Nations University, a research arm of the United Nations, also showed that Singapore produced the second-highest volume of e-waste in the region at 19.95 kg per capita in 2015. Hong Kong was the top e-waste dumper, at 21.7 kg per capita.

Over 60 countries in the world has implemented legislation for e-waste disposal, said the NEA.

http://www.businesstimes.com.sg/governme...d-possibly

[opmi]

New meh? Heard of Citiraya??? Hahaha

[karlmarx]

Citiraya is an e-waste recycler. They process items brought to them and salvage useful materials.

When retailers are required to collect (and dispose) e-waste, they need someone to collect the e-waste from their shops. If the number of such collections is small, recyclers like Citiraya may be able to manage with their own collection fleet. But if the number of collection points is increased -- Challengers, Best Denki, Courts, Harvey Norman, handphone shops, etc -- recyclers like Citiraya has to expand their fleet, which they may not wish to since it is not their core operation. And so there may be opportunities for public waste collectors (800 super, veolia, colex, sembcorp) to collect e-waste and send them to recyclers like Citiraya.

http://webcache.googleusercontent.com/se...clnk&gl=sg

[cyclone]

Request for Trading Halt : Pending release of an announcement.

[karlmarx]

A rights issue to reduce the huge borrowings, is likely.

[holymage]

Yet another good company being privatised.

8S Capital Holdings Announces
Voluntary Conditional Cash Offer for 800 Super Holdings
 Offer Price of S$0.90 per Share Presents Shareholders an Opportunity to Realise Their Investment in Cash at a Premium to Historical Prices
 Offeror Does Not Intend to Increase the Offer Price
 Offeror Has Received Irrevocable Undertakings Representing about 77.6% of the Company’s Share Capital
 Offeror Intends to Delist and Privatise the Company
 Global Investment Firm KKR to Provide Financing to Support the Privatisation of the Company by Its Founding Family

[karlmarx]

Business Times has written a good article on the offer to privatise 800 Super. But is the offer fair, especially for the long term opmi?

1) What were their projections?

Privatisation will cost the Lee family about $36m, based on free float of about 23% of the $160m market cap of the company, valued at 90 cents per share. For the Lee family to take on a loan of this amount -- which is what they intend to do with the assistance of KKR, must be substantial to their net worth-- it must mean that they are confident of being able to extract this much worth of dividends to be able to repay in 4 years time. 

For KKR to be willing to loan the sum, it must mean that they are confident of 800's projected profits and dividends. Assuming that dividend payout ratio is about a third -- their creditors are unlikely to be comfortable with a high payout ratio, and should be expecting them to deleverage -- this must mean that they are projecting profits to return to about $24m a year.  Incidentally, this figure is also close to what you will get if you apply 800 Super's average ROA over the past 9 years (11%) against its latest total assets ($240m). Is this expectation a realistic assumption?

2) What makes the Lee family and KKR sufficiently confident to take the company private?

The reduction in profitability since fy17 is largely due to the operations of the new Tuas plant. As with most greenfield projects, but particularly for 800 Super due to its inexperience in this business, it has taken a long time to bring up its plant production to a profitable level. As of now, it is still unknown whether the plant is close to achieving full utilisation, though the next quarterly results may provide some clues.  Nevertheless, it is reasonable to assume that the plant's utilisation, and hence its profitability, will continue to increase. 

The Tuas plant's profitability is key as it will allow the company to bid for public waste management and cleaning contracts at lower than industry average margins; which means greater potential market share for 800 Super. The lease of the land where the Tuas plant sits on expires in 2035.

3) Is the offer compelling, or even fair?

For shareholders who bought the shares with the expectation that the Tuas plant will yield an increase in company profitability, they must be disappointed to see that management is now taking advantage of the low profitability and share price, amidst the plant's imminent improvement in profitability, to attempt a privatisation with such an underwhelming offer. 

If it can be assumed that profits will be about $24m from FY20 then the present offer of $160m values it at a multiple of a mere 6.6x earnings. 

If these assumptions are fair, it hence seems likely that the Lee family is hoping that opmi remains ignorant of the future prospects of the company. After all, it's reasons for delisting are hardly satisfactory; there are so many more listed companies with lower profitability still paying listing expenses, and there are also so many more listed company shares trading at lower liquidity.

Furthermore, KKR's involvement is not just a strong hint on the high probability of 800 Super's improved profitability. As KKR is also offered 22m convertible preference shares -- the percentage of shares if converted against total shares is not revealed -- this means that there is a high likelihood that we may see 800 Super relisted after 2023, and no doubt at a higher valuation.

4) What should an opmi with a longer term view do?

In any case, given the likelihood of the company's increased future profitability, the market value of the company's shareholders -- if it remains listed -- is certain to be higher. If the Lee family wishes to take the company private, they should have made a more compelling offer; one which reflects the future potential. Shareholders who believe that they deserve a fair offer should consider not accepting the offer.

I suspect that the latest results, which shall soon be released, may yet again show a poor bottom line to motivate opmi to accept the offer.