2024-04-20 06:55:00 ET
Summary
- While hazardous waste is not entirely comparable to their MSW brethren, CLH has many attractive attributes.
- As the largest player in the space, CLH has a proven history of managing waste properly.
- CLH is currently trading at 10.6x consensus EBITDA for 2025, a meaningful discount to their MSW peers.
The following segment was excerpted from this fund letter.
Clean Harbors ( CLH )
During the quarter I uncharacteristically built a position from nothing into our top holding. Clean Harbors is the largest US hazardous waste management company. Before digging into CLH I would like to diverge with a bit of personal history. In my early 20s, I worked at Macquarie Bank where our team was responsible for acquiring investments on behalf of our managed infrastructure funds and the bank's balance sheets. One of my first assignments was the acquisition of a publicly traded municipal solid waste ('MSW') management company (Waste Industries). While not technically infrastructure per-se, MSW has similar characteristics like being an essential service, operating regional monopolies, and controlling scarce assets. In any case we paid something like 8-9x EBITDA which was a premium to the then trading multiple. Waste Industries is now a small part of GFL Environmental which trades at 12x EBITDA. And GFL is actually at a notable discount to its peers of Waste Management, Republic Services, and Waste Connections that are at 15x. While hindsight is 20/20, buying into this asset class 15 years ago would have been a home-run given their strong cashflow and multiple expansion....
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For further details see:
Merion Road Capital - Clean Harbors: From Nothing Into Our Top Holding