One Man’s Waste Is Another Man’s Treasure!



Beauty is in the eye of the beholder” – Meaning to say that different people have different ideas about what is beautiful. For us value investors, as long as the business is legit (And of course legal as well), it would be of interest to us. Any good business priced at a discount would be of value to us!


What Catches Our Eye!

Most of us may be interested in things we notice in our everyday lives like Food & Beverage (F&B) players BreadTalk Group Limited (SGX:5DA) and Japan Foods Holdings Ltd (SGX:5OI) – Boosting brands like Ajisen Ramen, Menya Musashi and Fruit Paradise under them!

Infrastructure players like SMRT Corporation Ltd. (SGX: S53), property juggernauts CapitaLand Limited (SGX:C31) and service providers like Singapore Telecommunications Limited (SGX:Z74) could also catch our attention.

If we were to take a walk down Hong Kong’s shopping district, gold would be glittering from jewellery stores from the likes of Chow Tai Fook Jewellery Group Ltd (HKG:1929).


Money Doesn’t Have To Come From Investing In Popular Stuff!

Have we ever considered that money may not always have to be made from the popular stuff? No matter which company we invest in, at the end of the day a dollar gained is still worth a dollar.

Today let’s explore something in our everyday life and yet we don’t normally associate them as a “hot topic” for investments – Waste Management!

In Singapore alone, there are four licensed public waste collectors appointed by the National Environment Agency (“NEA”). There are a total of nine sectors in Singapore. Each licensed public waste collector is allocated a specific area:

SG Waste

The four public waste collectors are as follows:

1)    Veolio ES Singapore Pte Ltd: One of the main business activities of Veolia Environment VE SA (NYSE:VE) -French transnational company with one of their core operations being a global provider of environmental management services. They are in charge of the Pasir Ris-Tampines and Clementi-Bukit Merah sectors


2)    Colex Environmental Pte Ltd: Under Colex Holdings Limited (SGX:567), they are in charge of the Jurong sector


3)    SembWaste Pte Ltd: A subsidiary of Sembcorp Industries Limited (SGX:U96), they are an integrated waste management service provider with a strong leadership position in Singapore, in charge of five sectors in Singapore.


4)    800 Superwaste Mangement Pte Ltd: Under 800 Super Holdings Ltd (SGX:5TG), they are in charge of the Ang Mo Kio-Toa Payoh sector

An interesting thing to note would be that three out of the four are listed in the Singapore Exchange.


Barriers To Entry!

The advantage for this business in Singapore would be their significant barriers of entry into the industry. With successful bidders awarded seven-year contracts to service their respective sectors, it would be tough to challenge this industry from the outside!

Colex Holdings were awarded their second term 7-year contract for the Jurong sector which commenced on 1 April 2013 while 800 Super were re-awarded their contract commencing from 1 Jan 2014!

With these waste collectors serving both domestic and trade premises in Singapore, it certainly wasn’t too small of a contract size!


Value In Action

We can see that this is a sticky business with strong barriers of entry favoring the incumbents. However the issue would be are the business dynamics for example:

1)    Profitability meaning how much are their margins – Out of a dollar how much would their profit be?


2)    And how does their business structure look like, other than waste collection what are the other businesses they are involved in?


3)    How is their capital structure, are they utilizing a lot of debt?

These are some questions that we have to consider when we are doing our research! Stay tuned as we explore some of these issues in our following article on Colex Holdings and 800 Super!


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All views and opinions articulated in the article were expressed in Mun Hong’s personal capacity and do not in any way represent those of his employer and other related entities. Mun Hong does not own any shares in the companies mentioned above.

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