Solid Waste & Recycling

Feature

Waste Stock Watch (June 01, 1999)

The stock market rally that began in February and March continued through April as the Dow rallied over the 11,000-point level. The market reacted somewhat in May as the U.S. Federal Reserve Board sig...


The stock market rally that began in February and March continued through April as the Dow rallied over the 11,000-point level. The market reacted somewhat in May as the U.S. Federal Reserve Board signaled that it might raise interest rates to control inflation. The TSE index improved slightly as natural resource companies rallied while most other sectors consolidated.

The Solid Waste Index rallied 17.4 per cent in April and May, outperforming both the Dow (7.5 per cent increase) and the TSE (2.5 per cent increase) in the same period. The increase in the index was primarily driven by very strong gains in many of the U.S.-based environmental companies, including Allied Waste, Republic Services, Safety-Kleen and Waste Management–all of which gained over 20 per cent during the period. Many sectors that are closely tied to the overall state of the economy such as environmental services and manufacturing showed strong market interest. As Asian economies begin to stabilize and recover, the global economy is being viewed more favorably.

The rally in oil prices continued, leading to strong recoveries in the share price of many oil and gas related companies. This has also helped the oilfield environmental service sector as reflected by Newalta shares which increased 93 per cent in April and May.

It’s important for investors to remember that the index is a basket of companies that are selected to reflect the market performance of the solid waste industry as a whole. While some companies may have solid investment potential, many are included due to their size or importance in the industry. Investors should consult with an investment advisor before selecting specific companies to invest in.

Solid Waste Index

Index Companies Symbol Exc $Jan 98 $Nov $Jan 99 %Index %Chng Shares $Orig Valu $CurValu
Allied Waste Inc. AW N.Y 20.38 14.31 18.63 10 30.19 37 754.06 689.31
Anadime Corp. AEM T.O 4.00 1.05 1.00 5 (4.76) 469 1876 469
Browning-Ferris Industries BFI N.Y 34.56 38.63 41.50 10 7.43 22 760.32 913
Conor Pacific Enviro.Tech. CPA T.O 0.75 0.60 0.62 10 3.33 1000 750 620
Marsulex Inc. MLX T.O 6.00 4.00 3.99 10 (0.25) 125 750 498.75
Newalta Corp. NAL T.O 8.20 2.02 3.90 10 93.07 91 746.2 354.9
Phillip Environmental Inc. PHV T.O 12.10 0.66 0.41 5 (37.88) 31 375.1 12.71
Republic Services Inc. RSG N.Y 24.00 14.88 23.50 10 57.93 31 744 728.5
Safety-Kleen Corp. SK N.Y 15.75 11.94 15.69 10 31.41 48 756 753.12
Sani Gestion Inc. SNG.A Mtl 5.30 9.00 9.35 10 3.89 142 752.6 1327.7
Waste Management Inc. WMI N.Y 23.75 43.06 52.88 10 22.81% 32 760 1692.16
ww Total 100 $9,024.28 $8,059.15
(Note: numbers rounded, * denotes weighting change)
Statistics
Starting Point Jan 98 March 99 May 99 Percentage Return
TSE Composite 6329 6635 6802 +2.5%
DOW 7322 9822 10559 +7.5%
Solid Waste Index 7500 6829 8017 +17.4%
Technical analysis: The Solid Waste Index is calculated on a bimonthly basis. In order to maintain consistency and to meet the publishing deadline, it’s calculated on the last Friday of the second month of the given time period. The graph is plotted on a biweekly basis and the final point on the graph represents the closing values for the three indices Friday, March 26. The index was started at a value of 7500 points so that its magnitude is in the same range as the DOW and the TSE. It’s made up of a proportional representation of the firms listed, broken down by the itemized percentages. Share quotes ignore currency.

Hot Sector News

The repercussions from the Allied Waste acquisition of Browning Ferris Industries continued to dominate headlines in April and May. On May 17, Allied announced that it reached an agreement to sell its Canadian solid waste business to Waste Management Inc. for US $501-million.

Allied entered into the transaction in order to reduce its debt load and to focus on the growth of its core U.S. solid waste operations. In the first quarter, Allied completed the acquisition of 25 privately owned solid waste companies for US$171-million.

At press time, Burlington, Ontario-based Capital Environmental Resource Inc. completed its Initial Public Offering and listed on NASDAQ. Capital provides waste transfer, collection, disposal and recycling services in Canada and the U.S. Commencing with the next issue, Capital will be added to the Solid Waste Index and will replace Sani-Gestion Inc., which was recently acquired by the french company Vivendi, S.A.

While the solid waste industry consolidates into a smaller number of large players there are also signs of improving growth in the industry as a whole. In the first quarter, Allied Waste reported internal growth of 7 per cent. On May 6, Standard & Poors changed their outlook for Safety-Kleen Corp. to positive from stable, noting that industry consolidation and rationalization has improved prices and that prospects are improving in the industrial collection and recovery industries.


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