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When it was first IPO-ed to the market, it was bought up to 0.31 before falling out of favor to 0.12-ish and has since recovered. I use simple metrics and ratios to quantify its quality.
March 30th, 2013 - Price 0.199. Possible target 0.355 (78% upside)
Quantitative
1) Return on Equity
The ROE of 23.65% is rather impressive (anything >15 is pretty good) , effectively it means you are getting a return of 23% year-on-year, which in comparison to Warren Buffett or Temasek, is pretty comparable!
2) Debt / Equity
However, we know ROE can be easily distorted by the fact that taking a huge amount of debt can bump up ROE while making the company highly unstable. In this case, the reported amount here is incorrect. Calculating using the latest data from sgx.com , D/E = 48%, D/A = 25%. Which is rather manageable for the company to gear up and grow.
Source : http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_A0F71B8F22A36E3448257B120021226E/$file/800Super_Announcement_Unaudited_Half_Year_Financial_Statements_HY2013.pdf?openelement
3) Dividend Yield
Dividend is mangement's way of being confident about earnings, at 5.025% dividend yield, this beats a few Singapore Reits and beats your bank rate of 0.5% by quite a big margin of 4.5%.
4) P/E and EPS
Last year's EPS stands at 0.033 excluding any exceptional items, this gives a P/E of 5.9. So its rather undervalued by nature given that the STI's 10.91, so it has some way to increase in price. But that could also mean that the market doesn't believe so much in its prospects.
5) P/B
Book value ratio stands at 1.171, which is fairly valued, not much comments.
Qualitative
1) Venstar capital owns 6% of the company. My understanding is that this is a PE fund and that it believes in the prospect of this company for at least 5-7 years horizon.
2) 25 years of corporate history in Singapore, listing on Singapore market allows it access to capital fund for growth in the region.
3) Memorandum of Understanding signed with a company in China/ Middle East - potential for growth.
4) Clienteles are mainly government-linked and hence timely payment for services is unlikely to be an issue. Potential for growth is reasonable given there are 8 constituencies for bidding and they currently secure one.
5) Diversity of revenue sources in 3 key areas - Public/Commercial waste collection and recycling / Cleaning and conservancy services / Landscaping services (gardening)
6) Recession proof industry - 1 of 4 players in the Singapore - 2nd or 3rd in Singapore.
7) Listing on market has helped improved its standing in the business community. This also allows it to expand overseas through joint-ventures and tie-ups. Other benefits include talent attraction and retention.
8) Management CEO is rather bullish about prospects - http://bizdaily.com.sg/newsite/biz-interview-william-lee-ceo-800-super-holdings-limited/
Risks
1) Squeeze on foreign labor supply may result in employee expenses rising significantly (automation however helps reduces some of this risk)
2) Larger competitors in waste management such as Veolia and Sembcorp can actually bid more competitively for contracts due to their sheer size and capitalization
3) Small market size (catalist) may result in relatively low liquidity for shares
Read more about the company here: http://800super.com.sg/service_recycle.html
I feel this is a company for the long run. Do conduct your own due diligence before deciding!
Have a great day
Bobby
Disclaimer:
Investors should be cautious about any and all stock recommendations. Various factors, including personal or corporate ownership, may influence or factor into stock analysis or opinion.
All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is no guarantee of future price appreciation.
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