Cleanaway Waste Management intends to build EfW (energy from waste) facilities in Melbourne and Brisbane with 300-500,000t per annum capacity. Credit Suisse expects most of the investment will be incurred in FY25 and FY26 with commissioning and commencement of operations in FY27.
The company considers the construction and demolition market an attractive growth opportunity, with the investment expected to double its tangible asset base.
While management retains segment EBITDA margin targets, the broker believes this is a poor metric for a business with a high diversity of capital intensity and return on invested capital or EBIT margin targets would be better. Credit Suisse downgrades to Underperform from Neutral and reduces the target to $2.60 from $2.80.
Sector: Commercial & Professional Services.
Target price is $2.60.Current Price is $2.84. Difference: ($0.24) – (brackets indicate current price is over target). If CWY meets the Credit Suisse target it will return approximately -9% (excluding dividends, fees and charges – negative figures indicate an expected loss).
