Enviro-Hub Holdings - SAC Capital 2022-09-08: E-Waste Recycling Buttressed By Legislations, Hybrid Work


Enviro-Hub Holdings - E-Waste Recycling Buttressed By Legislations, Hybrid Work

  • Enviro-Hub (SGX:L23) has 4 core businesses:
    1. e-waste recycling and metal refining;
    2. piling contracts, construction and rental of equipment;
    3. property investment; and
    4. healthcare, which comprises glove manufacturing and a 40% stake in a start-up to build a chain of retail pharmacies in Malaysia.

Enviro-Hub's Business Segments

E-waste recycling and metal refining

  • Enviro-Hub collects end-of-life electronic products, equipment and scraps from OEM/EMS manufacturers, testing and assembly houses, stockists and distributors. These devices are taken apart to extract the base metal and precious metals in them such as gold, silver, palladium and platinum, which are then refined and sold.
  • Sale of the extracted precious metals accounts for 97% of the segment’s revenue. For some customers, Enviro-Hub also earns a processing fee, which contributes the remaining 3%. FY21 revenue and earnings were lifted by new customers and higher prices of precious metals.
  • Revenue is dependent on the volume of end-of-life products processed and the quantity and price of the precious metals extracted and refined. The costs of production include the costs to acquire the end-of-life products and the chemicals for processing and refining, manpower and rental.
  • Enviro-Hub recycles mainly infocomm technology (ICT) products such as mobile phones and laptops. Its two plants in Singapore have a combined processing capacity of 3,600 ton/year as at end 2021, which was raised by 40% to 5,100 ton/year in 2Q2022, to position for potential increase in demand. Singapore generates about 60,000 tons of e-waste annually.
  • Since 2019, Singapore has tightened on the management of e-waste with the Resource Sustainability Act, 2019 (Singapore), which legislates on e-waste management in Singapore. The Act provides for an extended producer responsibility system, where producers bear the responsibility for the collection and treatment of their products when they reach end-of-life. To this end, the National Environment Agency has introduced a regulated e-waste management system in July 2021 that ensures the proper collection and handling of e-waste and the extraction of valuable resources from e-waste.
  • Besides regulatory requirements, demand for e-waste recycling also rises along with product innovation and replacement cycle, and consumption spending on tech products.

Property investments

  • Enviro-Hub owns several industrial properties which are leased out for rental income. Over the last few years, it has been disposing strata units in these properties to pare down debt. The properties are revalued annually. The value of these assets as at end 2021 was S$59.7m, at an estimated cap rate of about 3.0%.

Piling contracts, construction and rental of equipment

  • Enviro-Hub provides piling services, and is involved in the rental and sale of cranes and heavy machinery for the construction industry. This is a legacy business that generates a marginal loss, and which Enviro-Hub is looking to downsize and exit.


  • Enviro-Hub acquired a 25% stake in Pastel Glove in Feb 2021, and raised its stake to 100% in late Oct 2021. The acquisition is valued at S$28.7m, with an earn-out bonus of S$17.6m for profit from FY22-FY24. The founder Law Siau Woei had provided a profit guarantee of S$23.4m over these 3 years. The acquisition was partly funded by 292.5m new Enviro-Hub shares at S$0.076. Law now holds 18.5% of Enviro-Hub.
  • Pastel began the production of rubber gloves in March 2021 in Malaysia, with an installed capacity of 1bn gloves/year as at end 2021. The product mix is 70% latex and 30% specialty gloves currently. It plans to increase the share of the latter.
  • Glove makers are facing headwinds from excess channel inventory and cheaper products out of China. Nitrile gloves are harder hit, due to overbuild of capacity during COVID-19. Still the price pressure on nitrile gloves would flow through to latex gloves if the price gap widens. On a positive note, latex prices are easing, which allow latex glove makers to pass on cheaper raw material costs to the customers.
  • Pastel Gloves took a 40% stake in Pastel Care, a start-up to build pharmaceutical retail outlets in Malaysia under the brand name R Pharmacy. The remaining 60% is also held by Law Siau Woei. Three retail pharmacy outlets have been set up in Klang Valley, Malaysia. It targets to roll out 25 outlets in FY2022.
  • The segment contributed S$3.3m revenue and a loss of S$0.2m in 1H22.

Enviro-Hub's Financials

  • Fair value change and disposal gain/loss on investment properties have swung Enviro-Hub's net earnings in the last few years. Since FY20, Enviro-Hub has disposed strata units in the investment properties. The disposals and equity raising of S$8.5m in FY20 (206.7m new shares at S$0.042 each) strengthened its balance sheet and lowered interest expense.
  • Enviro-Hub's net gearing at Jun 2022 was 0.45x.
  • The catalysts for growth are:
    • higher recycling and refining volume with the 40% increase in processing capacity to 5,100 ton/year in 2Q2022;
    • hybrid working environment fuels higher usage and replacement of electronic devices; and
    • roll out of retail pharmacy outlets in Malaysia.
  • The outlook for glove manufacturing is uncertain given excess channel inventory and continued price pressure, but the impact on Enviro-Hub is mitigated by its small capacity of 1bn/year, and focus on niche products.
  • See
  • Enviro Hub's Share Price trades at 0.9x P/B and 1H22 annualized EV/EBITDA of 15.3x.

Peggy Mak SAC Capital Research | https://www.saccapital.com.sg/ 2022-09-08
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998.000 SAME 99998.000