Citi initiates coverage on the Australian waste management sector, rating Cleanaway Waste Management a Buy with a $2.40 target.
Despite some near-term earnings risks, the broker is attracted to the prospects for margin expansion, industry consolidation and demand for onshore waste processing. This may keep upward pressure on industry costs over the short term, but the broker expects this will be transitory.
The broker prefers exposure to Cleanaway versus Bingo Industries ((BIN)), given earnings growth and a strong balance sheet as well as an undemanding valuation.
Sector: Commercial & Professional Services.
Target price is $2.40.Current Price is $2.07. Difference: $0.33 – (brackets indicate current price is over target). If CWY meets the Citi target it will return approximately 14% (excluding dividends, fees and charges – negative figures indicate an expected loss).