Tox Free Solutions: Growth Prospects


Tox Free SolutionsTox Free Solutions (TOX) is a hazardous and toxic waste disposal company focusing on the recovery and recycling of hydrocarbons and other waste streams.

The company implements technologies for the remediation of contaminated soils recovery and recycling of waste oils, treatment of oil contaminated water, treatment of acids and alkalies and separation of hazardous waste.

TOX operates in three main segments: Waste Services, Hazardous Waste Services, Industrials Services

The group has operations throughout Australia with a growing presence on the east coast via recent acquisitions.

FY12 results

TOX’s FY12 results continued to impress especially given the current environment. FY12 revenue was $207.9 million, a massive 45% increase on the prior year’s result.

Over the year NPAT grew 31% to 17.2 million, whilst EPS increased 15% to 16.3 cents a share. The company also managed to increase its dividend over the period by 33% to 4 cents a share, fully franked.

The group’s gearing ratio rose from 11% to 30%, but that was largely due to the acquisition of DoloMatrix earlier in the year. Despite the rise in gearing TOX’s balance sheet remained healthy, with free cash flow increasing from $63.4 million in FY11 to $142.5 million in FY12.

Diversification and growth

The above graph shows the diversity of TOX’s earnings stream. The segments we would consider to be most at risk are oil and gas, and mining.

TOX’s client base in these areas include Woodside Petroleum, Fortescue Metals and Origin Energy, all of which are less likely to cut TOX’s services than the smaller commodity players.

The acquisition of DoloMatrix, which was completed in February, only contributed about a quarter’s worth of revenue in FY12 and as such we see it being a major contributor to growth in FY13.

The synergy benefits of the acquisition should begin to come through in the coming year, and are likely to fully materialise following the acquisition’s successful integration.

Outlook

TOX’s FY12 results represented another year of stellar growth. We are expecting another strong year from the company, with the DoloMatrix acquisition likely to spur growth in the current period.

We see this growth translating to further share price gains in the near-to-medium term.

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