Cleanaway Waste Management Ltd (ASX: CWY)

Cleanaway Waste Management Ltd (ASX: CWY) is an environmental service, industrial, and total waste management company based in Australia. ‘Cleanaway Waste Management Limited (CWY) is a part of Global Green Energy Report'.

Recommendation Rationale – SELL at AUD 2.84

• Lower Liquidity: CWY’s current ratio of 0.78x in H1FY24 is lower than the overall industry’s median of 0.94x. In addition, Cash Cycle of 69.6 days for CWY is also higher than the overall industry’s average of -67.4 days.
• Trading around Resistance: CWY’s share price is hovering near the R1 level recommended on 24 April 2024; and therefore, there can be a possible decline from the specified resistance levels.
• Overvalued Multiples: On a forward 12-month basis – key trading multiples such as EV/EBITDA, Price/Earnings, and EV/Sales are higher than the median of Professional & Commercial Services sector.
• Market Risks: The market sentiments can remain weak in the short-term due to the subdued consumer disposable income, geopolitical tensions, and political risks.

CWY’s Daily Price Chart

 (Source: REFINITIV; Analysis by Kalkine Group)

Valuation Methodology: Price/Earnings Approach

CWY is expected to trade at a slight discount of 1%, owing its lower net margins, lower liquidity relative to industry’s median and mounting sequential credit risk exposure. For conducting the valuation, the following peers have been considered; Delorean Corporation (ASX: DEL), Papyrus Australia (ASX: PPY), Range International (ASX: RAN), and Eden Innovations (ASX: EDE).

Given its current trading levels, recent rally in the share price, relative valuation, and risks associated, it is prudent to book profit at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the closing market price of AUD 2.84, as of 17 July 2024.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 17 July 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.