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  • Catalysts For Growth In Waste Management – Hamzah Mazari – Credit Suisse

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    On Friday July 8, 2011, 10:35 am EDT

    67 WALL STREET, New York – July 8, 2011 – The Wall Street Transcript has just published its Water, Waste & Environmental Services Report offering a timely review of the sector to serious investors and industry executives. This Special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

    Topics covered: Water Infrastructure Development – Irrigation and Metering Technology – Water Industry Consolidation

    Companies include: Global Water Resources’ (GWR.TO); Heckmann Corp. (HEK); Progressive Waste Solutions (BIN); and many more.

    In the following brief excerpt from the Water, Waste And Environmental Services Report, expert analysts discuss the outlook for the sector and for investors.

    Hamzah Mazari is a Senior Analyst at Credit Suisse, where he covers the environmental and industrial services sector. He first joined Credit Suisse as an Associate Analyst, covering the paper and forest products sector on the basic materials team. He also served as Lead Analyst for the timberland space. Mr. Mazari received an honorable mention in the 2008 Institutional Investor survey for paper and forest products. He holds a B.A. in economics from Stanford University and was awarded the Chartered Accountant designation in 2004.

    TWST: Where are you focusing your attention in the waste management space these days?

    Mr. Mazari: I cover both the solid waste industry as well as the hazardous waste industry for Credit Suisse. On the solid waste side, these are names like Republic Services (RSG), Waste Management (WM), Progressive Waste Solutions (BIN), which has ticker BIN, and Waste Connections (WCN). It’s all the large public companies, which make up 60%-plus of the revenues for the industry. I also cover Covanta Energy (CVA), which is a waste-to-energy pure play. They burn trash to create electricity. And I cover, on the hazardous waste side, Clean Harbors (CLH).

    TWST: How are the stocks responding to that environment?

    Mr. Mazari: When we look at the stocks, they have begun to catch a bit as of late. Remember last year, these stocks lagged, and a big part of these stocks lagging last year was that investors within the industrial sector wanted to own early and mid-cycle names, as well as names that are high beta. These stocks are low beta and they’re very late cycle, and so last year, they lagged. This year, they’re starting to catch a bit, particularly as the market sort of pulls back. These are a little more defensive, they’re lower beta, and the benefit of the cycle turning is yet to come. So as of late, they’ve started to catch a bit. Our favorite name within the group is a company called Republic Services, where we think expectations are very low, and that name has lagged the group as well. Part of it had been a stock overhang that has now cleared because Blackstone (BX) owned a chunk of this company and that has since come out.

    TWST: Waste Management has a recycling subsidiary, correct?

    Mr. Mazari: Yes, that’s right. When you look at recycling for the sector in general, recycling makes up about 5% to 7% of revenues for the larger public companies. Remember, that is going to vary quite a bit with where OCC, or old corrugated container, pricing is, because 75% or 80% of recycling revenue is tied to commodity prices for old corrugated container. And those are relatively high right now.

    TWST: What about M And A and consolidation? Do you expect to see a lot of smaller deals?

    Mr. Mazari: Yes, for Waste Management and Republic, effectively, large consolidation is over because there will be antitrust issues for anything large that they gobble up. There’s nothing large that they can really do that moves the needle. For the companies like Progressive Waste Solutions and Republic, there is little overlap there. That would be a massive deal; we are not expecting that to happen yet at all. Waste Connections doesn’t have any overlap with Progressive Waste Solutions either, but their cultural issues there in terms of how the management teams operate and the business model that would make that deal sort of tough near-term. But we think that there are assets with revenues in the $ 200 million to $ 360 million, $ 370 million range, assets that private equity currently owns that are going to come to market.

    TWST: Where are you pointing investors now? You mentioned Republic. Is there anybody else you like right now?

    Mr. Mazari: We’re telling investors to buy Republic Services right here. That’s our favorite name within the group. And then we also like a company called Progressive Waste Solutions, as well as Waste Connections. Waste Connections has had a nice move recently. So we would instead look at Progressive Waste Solutions right here, because we think that their Canadian assets are underappreciated; the growth in their Canadian business is underappreciated, and they have some additional synergies that are yet to roll through from the Waste Services acquisition that they did recently.

    The Wall Street Transcript is a unique service for investors and industry researchers – providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This Special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

    The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

    For Information on subscribing to The Wall Street Transcript, please call 800/246-7673

    Yahoo! Finance: Waste Management Industry News

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