About: Cleanaway Waste Management Limited is Australia’s largest total waste management solutions company, employing over 5,500 people across Australia. The company services customers ranging from small businesses to large multi-national commercial and industrial organisations across a range of different industries.

Why it’s in the portfolio: We remain positively disposed towards CWY’s investment case given its high level of earnings visibility and growth optionality across each of its businesses. CWY’s vertically integrated waste model across collections, resource recovery, treatment and landfill afford the company with high barriers to entry in an essential industry. CWY remains well placed to benefit from structural changes to the Australian waste industry, which increasingly bestow higher regulatory imposts and a growing requirement to provide sustainable waste management solutions.

Fundamentals: Cleanaway has a market capitalisation of $4.6bn and is currently trading on a PE ratio of of 38. It has a dividend yield of 1.36% and an earnings yield of 2.62%.

What could go wrong? Australia’s waste management industry is benefitting from several tailwinds including growing waste volumes per capita, improving resource recovery rates, and industry consolidation. Cleanaway is therefore exposed to slowing waste volumes potentially brought on by a sustained economic downturn or a shift in political attention. CWY operates on a long-term contract basis, so also faces risks in loss of contracts to competitors, particularly Bingo at this point in time.