BLY - Boart Longyear Group

[Julia]

With thanks, Ferret and skc.

 

[prawn_86]

Shares down 28% today, does anyone know what has caused such a sell off? I'm assuming a very poor earnings report

 

[DocK]

Shares down 28% today, does anyone know what has caused such a sell off? I'm assuming a very poor earnings report

From the announcement found on Commsec:

RESULTS SUMMARY
First Half 2012:
· Revenue US$1,099 million; up 15% versus first half 2011
· EBITDA US$208 million; up 26% versus first half 2011
· NPAT of US$98 million; up 32% versus first half 2011
· Earnings per share of 21.5 US cents; up 32% versus first half 2011
· Interim dividend of 6.4 US cents per share; up 33% versus 2011 interim dividend

OUTLOOK
Revised Full Year 2012 Guidance:
· Forecast revenue in the region of US$2 billion
· Forecast EBITDA of approximately US$360 – US$390 million
· Forecast CAPEX of US$275 million, down 8% from original guidance
Given industry and macro-economic developments since the start of the second half of 2012, the
Company is revising its 2012 full-year guidance for revenue and EBITDA. Boart Longyear’s
exploration market indicators are mixed and the Company’s visibility is being impacted by conditions
that vary by business, region, customer and project. Considerable work undertaken in recent years to
variabalise the Company’s cost base, particularly in Products, to help ensure the Company is
prepared for any short-term downturn in demand.
Mr. Kipp added, “We are seeing a mining industry in a state of flux. Global uncertainties like the
European debt, decreasing growth in China, restrictive financing conditions, and the upcoming US
elections are driving our mining customers to be more cautious with their capital and direct it to their
higher quality assets.
“Against these uncertainties, commodity prices remain historically strong and inventories are relatively
low. Our customers generally remain very profitable and have strong balance sheets. In some cases,
we are seeing expanding demand at certain sites, especially in regions with lower labour costs,
supportive governments and favourable logistics.
“Given mixed market conditions, our visibility beyond the near term is very limited. As a result, we
have updated our key assumptions for utilisation, backlog, sales, and pricing for the second half of
2012. These changes result in a revision of our guidance for full year 2012, resulting in revenue and
EBIDTA estimates that are more in line with our 2011 results.
“Despite some uncertain market dynamics, we are extremely well positioned for the future. Given the
strength of our customer relationships, innovative products and services, and operational programs
we are able to respond quickly to any changes in market conditions.
“Overall, we remain very optimistic about the long-term fundamentals for the business and our growth
prospects for the industry.”

It would appear that Mr Market doesn't like their guidance....

 

[skc]

Shares down 28% today, does anyone know what has caused such a sell off? I'm assuming a very poor earnings report

Report's not terrible but the outlook was negative. This is one serious smackdown and dragged the whole section with it... the market really doesn't know what to think about the mining boom. When MND's boss said it's all good everything went up 6%. When BLY boss said it's in a state of flux, everything's down 8%.

 

[tech/a]

Report's not terrible but the outlook was negative. This is one serious smackdown and dragged the whole section with it... the market really doesn't know what to think about the mining boom. When MND's boss said it's all good everything went up 6%. When BLY boss said it's in a state of flux, everything's down 8%.

Its pretty clear.
If BHP has put a halt on Olympic Dam
then forget a resourse boom.
Aint going to happen. The knock on effect will be
very wide and very hard. From Government to
Associated suppliers to potential workers
to you and I.

Not a sector to be playing in in my opinion.

 

[skc]

Its pretty clear.
If BHP has put a halt on Olympic Dam
then forget a resourse boom.
Aint going to happen. The knock on effect will be
very wide and very hard. From Government to
Associated suppliers to potential workers
to you and I.

Not a sector to be playing in in my opinion.

This is the most volatile sector second to mid-tier miners and gold. Certainly not for long term buy-and-hold investment, but it's the perfect sector to play in (if you know what you are doing).

BLY has fallen way out of whack compared to other drilling peers like ASL and SWK. Look for short term reversal to the mean.

Fundamentally, it probably has some balance sheet pressure that hasn't surface yet. It will come out over the next week or so - potentially. On the price action - you'd think a low is in at $1.555 for the day, but I doubt there's going to be too much of a bounce - may be back to the open price..

And 3 weeks ago when it got whacked to $2.06 and we were all "woo-ing and arh-ing" ...

 

[odds-on]

Report's not terrible but the outlook was negative. This is one serious smackdown and dragged the whole section with it... the market really doesn't know what to think about the mining boom. When MND's boss said it's all good everything went up 6%. When BLY boss said it's in a state of flux, everything's down 8%.

I am going to read some old magazines - pretty sure that all the "experts" were of the opinion that this mining boom will be on for decades.

Applying my favourite saying "When everybody thinks alike, Everyone is likely to be wrong", either:

1. The experts were wrong.

Or...

2. The experts are right but the market is being a little touchy to a boom that is unlikely to be linear.

Cheers

Oddson

 

[notting]

Applying my favourite saying "When everybody thinks alike, Everyone is likely to be wrong"
Oddson

Seems like everyone is thinking alike today!!!
China appears to be downramping. I'll be looking for some take over activity coming a few months down the track.
Then some stimulus. They have that capacity.

 

[McLovin]

I am going to read some old magazines - pretty sure that all the "experts" were of the opinion that this mining boom will be on for decades.

Applying my favourite saying "When everybody thinks alike, Everyone is likely to be wrong", either:

1. The experts were wrong.

Or...

2. The experts are right but the market is being a little touchy to a boom that is unlikely to be linear.

Cheers

Oddson

This chart is telling. This is a commodity that is still fairly abundant...

http://www.indexmundi.com/commodities/?commodity=iron-ore&months=240

Unless the laws of supply and demand cease to exist in the Pilbara, I think we all know what's coming.

 

[odds-on]

Seems like everyone is thinking alike today!!!
China appears to be downramping. I'll be looking for some take over activity coming a few months down the track.
Then some stimulus. They have that capacity.

Ha ha ha. I wonder if there will be a power law distribution to the failures / takeovers.

 

[Gringotts Bank]

Its pretty clear.


Not a sector to be playing in in my opinion.

Yep. Time to look for a new sector. Healthcare, gambling, alternative energy should come to the fore.

 

[skc]

I don't get it. If the mining boom is ok, why just sell down the drillers?

BLY -36%
IMD -18%
ASL -10%
SWK -8.5%
ALQ -8.5%

These guys are only trading at PE 5-8x. Sure earning will fall substantially if no one drill anything anymore, but why not go sell down WOR / MND with PE 15-18x?

 

[odds-on]

This chart is telling. This is a commodity that is still fairly abundant...

http://www.indexmundi.com/commodities/?commodity=iron-ore&months=240

Unless the laws of supply and demand cease to exist in the Pilbara, I think we all know what's coming.

A big rebound as per copper in 2008

http://www.indexmundi.com/commodities/?commodity=copper&months=240

 

[notting]

I don't get it. If the mining boom is ok, why just sell down the drillers?

BLY -36%
IMD -18%
ASL -10%
SWK -8.5%
ALQ -8.5%

These guys are only trading at PE 5-8x. Sure earning will fall substantially if no one drill anything anymore, but why not go sell down WOR / MND with PE 15-18x?

Because Pros tend to play in the bigger boys? Amatures and small time spectulators who love these kind of high beta stocks react to Chinese propoganda, and stocks are small enough to exagerate the moves?

 

[McLovin]

A big rebound as per copper in 2008

http://www.indexmundi.com/commodities/?commodity=copper&months=240

I'll sit on the other side of that bet.

 

[skc]

Because Pros tend to play in the bigger boys? Amatures and small time spectulators who love these kind of high beta stocks react to Chinese propoganda, and stocks are small enough to exagerate the moves?

BLY, ALQ (aka Campell Brothers) and ASL are pretty big companies (>$B) - well until recently for BLY anyway.

I think it's more to do with balance sheet leverage and operational leverage. For WOR to respond to falling demand, they can just cut their headcount, pay some redundancies and they have trimmed their costs accordingly. BLY on the otherhand has a large fleet paid for with borrowed money so the cost base is more fixed.

Anyway - it closed on the low... unbelievable. I think I will read their report again.

 

[notting]

BLY
Anyway - it closed on the low... unbelievable. I think I will read their report again.

Yeah. I thought your 1.55 call was spot on!! Took a litte bite too.

 

[So_Cynical]

Its pretty clear.
If BHP has put a halt on Olympic Dam
then forget a resourse boom.
Aint going to happen.

Really...so what's the recent track record of opinions and decisions made by BHP management?

Ravenswood?

Rio Merger?

Potash?

That US shale mob?

The random person that will be sitting next to me on the train tomorrow morning will have more credibility and economic insight than BHP management.

--------------

Mining boom not over, the boom has stopped booming for sure but the super cycle is in tact, as any 10 year chart will show (Iron, Coal, Nickel, Gold, name your mineral commodity) ~ what we will have over the next 3 or 5 months is an opportunity to get into some great stocks very cheaply, ready for the next run up...it wont be as good as late 2008 but it will be good...all IMO of course.

 

[McLovin]

Really...so what's the recent track record of opinions and decisions made by BHP management?

Ravenswood?

Rio Merger?

Potash?

That US shale mob?

The random person that will be sitting next to me on the train tomorrow morning will have more credibility and economic insight than BHP management.

--------------

Mining boom not over, the boom has stopped booming for sure but the super cycle is in tact, as any 10 year chart will show (Iron, Coal, Nickel, Gold, name your mineral commodity) ~ what we will have over the next 3 or 5 months is an opportunity to get into some great stocks very cheaply, ready for the next run up...it wont be as good as late 2008 but it will be good...all IMO of course.

SC

In your opinion do you think the high prices for ore ($100+) are sustainable across the cycle?

Cheers

 

[skc]

Really...so what's the recent track record of opinions and decisions made by BHP management?

Ravenswood?

Rio Merger?

Potash?

That US shale mob?

The random person that will be sitting next to me on the train tomorrow morning will have more credibility and economic insight than BHP management.

It doesn't matter that BHP management has a record of medium to large blunders. They are the ones controlling the capex decision and when they said they are cutting back on capex... it happens (whether they are right or wrong) and there is a material decrease in money going into mining.

Anyway... here's a thought.

BLY made $100m in half year has a market cap of ~$690m.
ASL made $110m in full year has a market cap of ~$940m.

Can ASL really keep growing while BLY shivers?