Shanks (SKS) has not been a great stock to own over the past few years. The shares went backwards in 2010, 2011 and 2012 as the company struggled with falling volumes of waste to process and pricing pressures. So we advised selling last April as fears mounted that the company would have to cut its dividend. The dividend was held and the share price rallied, but we are back for another go as we believe the rally has pushed the rating to levels that look unrealistic compared with Shanks's lacklustre growth prospects.
- Weak volumes in Benelux countries
- Pricing pressure in organic waste
- Cautious recent trading update
- Highly rated despite lacklustre prospects
- Cost-cutting helping
- Decent prospects in hazardous and UK municipal waste
In a recent trading update, Shanks said market conditions remained challenging, with continued difficulties processing waste in the Benelux countries and organic waste throughout the European Union. It expects these conditions to persist throughout 2014 and the full-year result for 2013-14 (due on 15 May) should be "broadly" in line with City expectations. That seemed a little more downbeat than the previous month's update when Shanks was "confident" of delivering in line with expectations.