Cleanaway's Safety Reset Meets A Widening Valuation Gap

Fund managers are weighing a post-fatality safety overhaul against a valuation discount to global waste management peers

30 Jun 2026 · 5 min read

Safety, not earnings, was the focus of the most recent manager engagement with Cleanaway Waste Management. Paradice Investment Management said in its June 2026 quarterly report that a meeting with the chief executive was followed by an investor briefing covering the company's health and safety strategy after recent workplace fatalities. The manager said it was encouraged that an independent safety review had found no systemic issues and that a multi-year safety uplift plan had been endorsed by the expert reviewer, though it continued to press management for more detail on how Cleanaway benchmarks its risk disclosures against other ASX-listed peers.

That engagement follows what several managers describe as a genuine valuation disconnect. Ellerston Capital's May 2026 monthly report argued that with the group's first strategic phase, which it calls Blueprint 1.0, now complete, a second phase focused on lifting utilisation and returns across the existing network is primed to work the platform harder. The manager said Cleanaway was trading at a five-year low, with its EV/EBITDA multiple falling from 12 times to 7.5 times, against peers Waste Management Inc and Republic Services trading at 13.8 times and 14.1 times respectively in the United States.

CWY is trading at a 5-year low and has seen its EV/EDITDA multiple fall from 12x to 7.5x. Compared to peer international stocks like Waste Management Inc and Republic Services Inc in the US, which trade on 13.8x and 14.1x EV/EBITDA respectively, CWY is grossly undervalued.

— Ellerston Capital, Monthly Report, May 2026

An investor day that reset expectations

The valuation argument gained support in April 2026, when Cleanaway laid out medium-term targets at its investor day. Pendal Group said the targets, which included growing margins by 260 basis points out to 2030, delivering 10 to 15 per cent EPS growth and growing free cash flow, were seen as reassuring by investors following years of the company generating no free cash flow and absorbing steady earnings cuts. The manager said Cleanaway's own framing was that its business platform is now complete, and that the coming years will be about leveraging its existing network of waste assets to lift utilisation and returns, language that closely mirrors Ellerston's Blueprint 2.0 characterisation.

The same month brought a reminder that Cleanaway is not immune to external shocks. Pendal's separate April 2026 update flagged a negative trading update tied to the conflict in Iran, which the company said would drag on FY26 earnings before interest and tax by around $20 million, or 4 per cent, driven by higher fuel costs recovered from customers on a lag and the shutdown of Middle East operations within its Industrial Services division. The manager noted domestic Australian demand had been little changed so far, with the only visible impact being a deferral of some project volumes, and that the FY27 impact should be modest assuming Middle East operations resume and fuel costs are recovered as expected.

Not every manager sees a turnaround story

Paradice Investment Management's own trading activity has told two different stories over the period. The manager initiated a small overweight position in September 2025, citing what it called relatively attractive pricing for the first time in several years and a strong asset base supporting solid defensive earnings growth with an improving margin profile. By March 2026, however, its monthly commentary showed it had exited the position, citing persistently lacklustre organic growth and continued weakness in free cash flow generation, a reversal that stands in contrast to Investors Mutual Limited's decision to top up its own holdings that same quarter on the back of what it called attractive prices.

What managers are watching next

With the safety review recommendations now in front of the board and Blueprint 2.0 targets set out publicly, the key questions for managers are whether Cleanaway can convert its stated FY27 step-up toward 20 per cent earnings growth into an actual re-rating of its EV/EBITDA multiple toward global peer levels, and whether the disclosed Iran-related cost drag proves as contained in FY27 as management currently expects.