Riddler-Edison4 Apr 2012 12:52
Investment summary: Results are just the start
Company description: Hazardous waste management
Since inception, Augean has built up a significant business in complete hazardous waste
management, encompassing assessment, recycling, treatment and disposal. It operates this
through a UK-wide network of well-invested strategic sites managed under strict quality
procedures, which places the group at the forefront of the hazardous waste industry.
Valuation: Moving beyond the medium case
We believe the impact of LLW is not yet reflected in the current rating, which is merely tracking
recovery in the core business and hence substantial potential upside remains. We run three cases:
• Low case. Little volume growth and recovery in the treatment divisions to break-even. We
believe this is a very bearish scenario, yielding fair value of 33p/share.
• Medium case. Single-digit volume growth and a steady return to profit in treatment
divisions with margins <10%. Reflects ongoing operational improvement and business
development efforts, yielding a fair value of 54p/share.
• High case. The recovery as described in the medium case, plus small initial contributions
from LLW, in line with management’s guidance for 2012, plus 5% growth thereafter. A
conservative view of the LLW potential in our view, yielding a fair value of 82p/share.