A Brief Company Overview
China Industrial Waste Management collects and recycles various types of industrial wastes for more than 650 customers, primarily in Dalian and surrounding areas in Liaoning Province, China. These recycled waste products are then sold to customers as raw materials to produce chemical and metallurgical products. As a result, revenues are derived from both waste collection and disposal services as well as sales of valuable products and recycled commodities.
Currently, CIWT operates four facilities with a combined 35,300 tons of capacity in segments like solid waste, hazardous waste, sewage treatment, and organic solvent product. Through subsidies from China’s National Development and Reform Commission, the company embarked on an expansion project at the end of July 2008 that will increase its total capacity to 77,000 tons. The company hopes that this expansion will help drive revenues and profitability going forward.
Going forward, CIWT plans to increase revenues and earnings by placing emphasis on the commercialization of solid waste treatment, expanding into municipal sewage and sludge treatment BOT projects, managing their businesses locally with a strong focus on customer service, entering into new geographical markets, and maintaining their financial capacity and effective administrative systems and controls to support ongoing operations and future growth.
A Strong History of Growth
Over the past four years, China Industrial Waste Management has grown its revenues more than 300% from $4.87 million in 2005 to $13.4 million in 2008. Similarly, the company’s bottom line net income grew more than 300% from $1.49 million in 2005 to $4.75 million in 2008. Historically, the company’s revenues have grown at a rate of 40.14% over the past three years, while its gross margins has grown at a rate of 70.4% and its earnings per share at a rate of 45%.
CIWT also leads its industry, sector and the S&P 500 in financial ratios, profitability ratios and management effectiveness ratios. For example, the company’s return on assets stands at a healthy 8.5x compared to 4.1% for the industry, 0.9% for the sector and a 6.0% for the S&P 500. Similarly its return on equity stands at 13.0% compared to 11.6% for the industry and 10.2% for the sector, suggesting that the company is run far more effectively than the competition.
Despite this strong growth, CIWT continues to trade at around 11.5x its trailing 12-month earnings. Meanwhile, the company’s price-earnings-to-growth (or PEG) ratio stands at near 0.29x, which suggests a conservative fair valuation of around $3.69 based on a P/E of just 20x. (See: “PEG: The Pinnacle of Valuation”). Going forward, the company also said that it sees “strong signals of recovery” from the downturn in 2008, in its most recent 10-Q filing.
- China Industrial Waste Management is a premier provider of industrial waste solutions in Northeastern China in the Liaoning Province and generates revenues through waste management service fees and by reselling recycled materials.
- China Industrial Waste Management has seen its revenues grow at a rate of 40%, yet the stock continues to trade at just over 11x its trailing 12-month earnings.