China Industrial Waste Management Inc. (OTC:CIWT) - China's Modern King of Waste Management

By Steve Reeves (edited by Ted Gottsegen at TheStockMasters.com) - The StockMasters Reader Contribution of the week

The waste management is a brilliant business idea since the raw materials are extremely cheap, readily available, and found every where on the planet. That being said, the potential profit of waste management companies is significant and a reason for investor investigation. Many American waste management (WM) stocks are climbing to new highs while increasing earnings annually despite intense competition in what's proving to be a crowded market place.

Rather then dive into the American WM companies consider what is occurring in China or India and the potential for the same business model. How could you not? The U.S. has a population of 400 million, China's and India's population is over 1.3 billion a piece -- think we have trash problems, think again. There is a Chinese company which is traded Over-the-Counter by the name of China Industrial Waste Management Inc. (OTC:CIWT). Few people know of it since it is traded on the OTC BB but this may be the time for a better look at their company and stock.

China Industrial Waste Management Inc., formerly Goldtech Mining Corp., provides waste disposal solutions and realty management service to its more than 400 customers. The Company operates through Dalian Dongtai Industrial Waste Treatment Co., Ltd. (Dongtai), which is engaged in the collection, treatment, disposal and recycling of industrial wastes principally in Dalian, the People’s Republic of China, and surrounding areas in Liaoning Province, the People’s Republic of China.

Compare CIWT to the American WM stocks which have a P/E over 25 and a P/BV over 4 (ECOL,CVA,CLHB, and AW) -- this is a very competitive market. CIWT is set to have about $3.2 million earnings for 2007 from its current prospects (based on a 20 % moderate increase from 2006 as management says) and with a P/E of 18.89 and P/BV 3 at the current price of $3 -- China Industrial Waste Management is starting to get my attention.

If two ongoing BOT projects are completed in 2007 then the earnings will easily overcome $3.5 million and their ability to generate cash (which is increasing annually) is a cycle that they will continue year after year.

Will CIWT have a brilliant future and can their business be successful in China?

No country has ever experienced as large or as fast an increase in solid waste quantities that China is now facing. China recently surpassed the United States as the world’s largest municipal solid waste (MSW) generator.

In 2004 the urban areas of China generated about 190,000,000 tons of MSW and by 2030 this amount is projected to be at least 480,000,000 tons. Management of this waste has enormous domestic and international implications. This report presents waste quantity estimates, that are considered to be sufficiently credible for national planning and resource allocation purposes.
Few companies in China can get a license to do waste management work there which in the big picture perspective is only in the infancy statges. CIWT has "exclusivity" in the Dalian area which is one of the most growing and industrialized areas in China and it is spreading daily to new regions due to the lack of competitors.

There are 1.3 billion people in China, consequently the waste pile is huge. The raw materials are even cheaper and the competitors are far less than those in the USA, so how do you think CIWT will clean up?

Management owns 72% of the outstanding China Industrial Waste Management Inc. (OTC:CIWT) shares, an apparent sign that they like their company. The CEO, Mr. Jinqing Dong, has ran the company for the last 15 years, he is an environmental engineer and the perfect guy for the job.

The Company is a monopoly for its region and is likely to continue growing (just like the trash problem there) steadily for next 5 to 10 years. As I said, the waste management industry is in its infancy and CIWT estimates growth rates of 20% annually for the next decade.

THE BOTTOM LINE:

CIWT is a grossly undervalued stock with great growth potential. It is a company that is able to grow revenue and earnings north of 20% over the long term while only trading at a P/E of 7.7 recently. Their product and business - dealing with trash is only going to keep increasing, it's not going away. So unless CIWT pulls an Enron there is no reason why they should not cross over to the NASDAQ or NYSE within the year.

Through sixteen years of operation, CIWT’s 90% owned subsidiary Dongtai has established itself solidly as a leading industrial waste treatment center in China’s northeastern Liaoning Province. Dongtai’s expansion and growth are strongly supported by a favorable regulatory and macroeconomic environment that dictates a somewhat guaranteed market and revenue.

What is truly unique about this microcap is that it is a cash cow. Call it "a little cash cow in China's industrial trash mounds!" This cute, little cash cow is capable of financing its remarkable growth through existing cash reserve and ongoing operating cash flow. Therefore, it looks like a rare microcap that can truly reward its investors over the long run.

Disclaimer: The Author does hold positions in CIWT.