Fellow blogger DK left me a comment and I thank him for that :)
Even though this company is in a defensive sector, its survival depends on winning contracts. There is no guarantee that the contracts will be awarded to them. Competitors include 800Super and SembCorp. Revenue growth is very much dependent on the quotation of the contracts.
How defensive?
Remaining contract years - 5
Colex covers the western part of Singapore, with a 7 year contract awarded by NEA starting from 1 April 2013 to 31 March 2020. Investors have about 5 more years of certainty and that's rather great news for me.
Re-awarded contracts
Since the new scheme has been in placed, NEA has re-awarded the contracts to the respective 4 Public Waste Collectors (PWC) in Singapore. Each of them have accordingly retained their "seats".
Uniform Fee
Yes, the waste collection service in Singapore is privatised (not all privatised schemes are "bad" and "costly", but I digress).
The Uniform Fee is set by the NEA in discussion with the 4 PWCs and is fixed for all households in Singapore (no price differentiation amongst the PWCs). The UF is fixed until the next review (something like transport fares?).
The next UF review is on January 2017 and once every 2 years thereafter.
Renewal of the next contract?
I tried googling for the criteria of the renewal of contracts to no avail. What I do know is that the Waste industry in Singapore practices the Uniform Fee scheme.
It seems unlikely that the award of contract to the PWCs will be based on price but rather service standards. I can only imagine NEA considering the service standards of the PWCs in considering their renewal applications.
Everyone is defending their own turf
From the last renewal exercise, it is quite evident that all 4 PWCs are focused on defending their own turf and not "expanding" their reach. After all, there are only 6 sectors in Singapore and it is only likely that NEA would want to inject competition into this industry.
To say otherwise is quite unlikely, given how the government lately is more keen on injecting competition into various industries (Transport, Telco etc).
But of course, nothing is certain! I'm only hoping for Colex to control its costs and enjoy the remaining 5 years of service in the Jurong sector.
From the last renewal exercise, it is quite evident that all 4 PWCs are focused on defending their own turf and not "expanding" their reach. After all, there are only 6 sectors in Singapore and it is only likely that NEA would want to inject competition into this industry.
To say otherwise is quite unlikely, given how the government lately is more keen on injecting competition into various industries (Transport, Telco etc).
But of course, nothing is certain! I'm only hoping for Colex to control its costs and enjoy the remaining 5 years of service in the Jurong sector.
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