SEMBCORP Waste Management (SembWM) is gearing up to be an aggressive player in the industrial and commercial waste (ICW) business with its acquisition of Semac, Singapore’s largest waste-management company.

SembWM president Cheong Quee-Wah, in an interview with The Straits Times, said: "While maintaining our share of the market for domestic waste, we intend to aggressively tap the ICW market here which is worth $130 million to $150 million a year."

In August, SembWM put in the highest bid of $120 million to clinch Semac.

It believes the acquisition will "ramp up" swiftly its capabilities to expand its services in Singapore and the region.

The sales and purchase agreement is conditional on the approval of the shareholders of SembCorp Industries, one of Asia’s largest infrastructure and marine engineering groups, which owns SembWM.

"ICW margin is better than that of domestic waste in most countries and we expert to capture 30 to 40 per cent of the ICW market here in three years," Mr Cheong said.

To achieve this goal, SembWM will be targeting "top-notch industrial and commercial players".

A wholly owned subsidiary of ENV Corporation, which is in turn a wholly owned subsidiary of Temasek Holdings, Semac enjoyed a monopolistic position in municipal waste collection in Singapore from 1996 to 1998.

In 1997, it diversified into the ICW segment, which now accounts for 10 per cent of its revenue. The remaining 90 per cent of its revenue comes from collecting domestic trash.

Mr Cheong believes that with the acquisition of Scmac, SembWM is well positioned to capitalise on the privatisation of the four remaining municipal collection zones. This is scheduled to take place by year-end.

The Environment Ministry has divided Singapore into nine sectors. Semac was not awarded the first two tenders, which covered Pasir Ris-Tampines and Bedok.

The results of three subsequent tenders are not out yet. Semac put in the lowest bid for the tender of the Clementi area and if price is the primary consideration, market-watchers expect it to clinch the deal.

Asked about Semac’s chances of bidding successfully for the last four sectors, Mr Cheon~ said: "We will bid aggressively but not irrationally.

"We will work towards improving our productivity and hope to get a more efficient costing that will give us a greater competitive edge."

Opportunities for improvement lie in "the use of assets", including the deployment of vehicles and people.

Semac supplies feedstock to four incineration plants and SembWM is "keen to get into the incineration business".

SembWM would like to create a vertically integrated value chain for waste management by biddirg successfully for the lncineration plants due to be privatised.

There are also waste collection opportunities in the region and Mr Cheong sees Semac "as a vehicle to move into countries like Thailand and the Philippines when Opportunities arise".

With a market share of 45 per cent of the waste industry in Singapore, Semac serves more than 700,000 homes and more than 41,000 shops, offices, commercial buildings and industrial estates.

It operates the largest fleet of refuse collection vehicles, mobile compactors and a large fleet of mechanical street sweepers, as well as five depots.

For the year ended March 31,2000, Semac made a net profit of $13.6 million on a turnover of about $145.6 million.

SembWM, which was set up a year ago, has established itself as a leading Asian waste management service provider through acquisitions and joint ventures

-By Lorna Tan

Source : The Straits Times, Oct 30, 2000

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