BOL - Boom Logistics

[Pioupiou]

I haven't read the report yet, but the market obviously likes it. The stock is up over 37% this week. It will be interesting to see if it can manage a close above 0.33 in the coming weeks.

http://www.smh.com.au/business/unde...r-yet-for-mining-services-20120815-247nn.html

Look at http://in.reuters.com/article/2012/08/31/midcap-boom-idINL4E8JV26T20120831

At 34 cents today, BOL is selling below its NTA. Consider this comment in annual report, "The overall growth in our business translated to an increase in Net Tangible Asset backing per share from 48 cents to 52 cents by year end."

BOL makes its money from established mines, so the downturn in exploration and firing up greenfield mines will not hurt it, whereas the incentive for existing miners and brownfield new starts to hold back on capital expenditure will conduce them to hire cranes and the like. If this is not a multi bagger at current SP of about 34 cents, then my rooster is a kipper.

I bought into BOL years ago for a silly reason, and lost value (on paper). I am now hopeful of recovering some of the on-paper losses.

 

[tinhat]

I couldn't resist selling at 38c on 13/9/12 (bought for 28c on 19/4/12). 38c was the support before the price turned south in May last year. I might buy back in. I'm just generally weary though of companies with such low returns on assets (5.3%) and equity (8.6%). Having said that, the price graph doesn't reflect that on most metrics the fundamentals have been improving for BOL over the past couple of years. ROA, ROE, EPS and EPS growth are all pointing up. Earnings growth forecasts provide forward PEs falling to 6.4 this financial year and <6 next financial year. If risk appetite increases and if buyers start discriminating more between mining service providers demand could take off. A lot of trading went on between 36c and 45c in 2010/11 and so there might be some holders who will be happy to get out at break even through that range.

I'll be interested to hear of any further analysis you might perform Pioupiou. Also, please keep us updated about your rooster.

 

[Ves]

At 34 cents today, BOL is selling below its NTA.

This is a horrible business - something tells me that the assets are not worth as much as the balance sheet says there are, especially not if it goes belly up.

What do you think the assets are worth?

 

[bullhunter]

A current market cap of $52 million. Seems low. I wonder if they are a take-over target.

 

[tinhat]

BOL has doubled since it bottomed, and up 25% in two weeks. It's on a firm trend at the moment. I jumped on today having mulled over their report. They've thrown a lot of money into capex to restructure the fleet. Despite the downturn revenue is holding up and they reckon 2014 will be better for business than 2013 - especially client spending on maintenance. They don't seem afraid to restructure their workforce and are negotiating a new enterprise bargaining agreement at a good time I would suggest. Will give the benefit of doubt to the management and see where the share price ends up in the medium term. Stop loss at 0.12

 

[pixel]

BOL has doubled since it bottomed, and up 25% in two weeks. It's on a firm trend at the moment. I jumped on today having mulled over their report. They've thrown a lot of money into capex to restructure the fleet. Despite the downturn revenue is holding up and they reckon 2014 will be better for business than 2013 - especially client spending on maintenance. They don't seem afraid to restructure their workforce and are negotiating a new enterprise bargaining agreement at a good time I would suggest. Will give the benefit of doubt to the management and see where the share price ends up in the medium term. Stop loss at 0.12

nice run, tinhat



Did you take profit yet? Or have you attended today's AGM?
Looks like some lively debates going on, judging by the split votes and first strike against remuneration.
http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01455887

 

[tinhat]

Hi Pixel. Yes it is. Lots of stocks making nice runs. For the moment at least, I seem to be getting better at picking momentum: BOL, BCI, CDU?, MIN, MLD, MML?, NHW, SOM.

As I mentioned in another thread the other day, I don't hold any conviction over BOL and it doesn't pay a divi, so it was purely a momentum play for CG. I still look at the fundamentals and "the story" of any company I buy into.

Mate, I wish I was spending my time at AGMs having cups of tea. No rest for the wicked I am afraid. I'm half way through screeding a fall onto a 180sqm flat concrete roof which is also a patio, which I then have to tile over (floor tiles). The weather in Sydney at the moment is the exact opposite of what I would like right now. Maybe if some of those shares I mentioned end up as double baggers I might be able to hire some tradesmen, but until then...

Thanks for the info about the first strike. A first strike is not a bad thing for shareholders in my opinion. In general they seem to be doing their job.

This company has a NTA per share of $0.50 but generates only 3% return on those assets to achieve a $0.02 pre-tax EPS. I hope the company can pull off a turn-around. I may or may not be owning shares when it does.

 

[Hoborg]

If this is too long, I apologise. I'm simply posting my analysis here for anyone to pick apart (please do). Here goes...

Let me start with this:

This is a horrible business - something tells me that the assets are not worth as much as the balance sheet says there are, especially not if it goes belly up.

What do you think the assets are worth?

I realise Ves' post is now close to two years old, but given the 'manage for cash' scenario that management are aiming for, it's quite a valid question... but let me twist it a bit, and pose the question as:
As a shareholder, at what value do these assets make this company worthwhile?

First, value of assets:
I took the most recent balance sheet and applied a multiplier on current assets to find recovery rate on each, assuming a gloomy scenario:

- Cash at 100% = $5,850
- Receivables recovered at 90% = $47,480 (depends on client base - big miners not a problem)
- Inventories at 70% = $291
- Prepayments at 90% = $3,617 (depends on suppliers - not sure of who they are at this point, but not a huge impact)
- Assets for Sale @ 50% = $3,530
- Income Tax Receivable at 100% = $4,450

Total Current Assets after adjustment = $65,217

Next, I calculated the required sale price on non-current assets to pay off debt and return capital to shareholders at current price (13.5c per share, Market Cap 64m):

Total Liabilities = $158,016
Operating Lease Commitments = $30,759
Total Liabilities with operating lease = $188,775


So, Total Liabilities (op lease incl) - Total Current Assets = $123,558 (lets call this 'Remaining Liabilities')
Total Non Current Assets = $328,710
Total Market Cap = $64,000
(Fraction of Remaining Liabilities + Market Cap) to Non-Current Assets = ($123,558+64,000)/$328,710 = 57%


So, for the company to pay off all debts (if done without calculating interest) and return capital equal to the current share price (13.5c) to the shareholder, the assets would need to sell at 57% of their balance sheet value - and this is without factoring in running/management costs.
Given the depreciation rates the company use (10/20 year terms on cranes/vehicles) and the macro environment, I'm not 100% sold on this... even though there have been no recent impairments relating to assets sold.

However, there's still operating cash flow to consider:


Cash Flow

BOL are managing for cash flow, and have adjusted their capex to reflect this.

- In FY2013, total capex on new equipment was 62.34m
- In first half FY2014, total capex on new equipment was 7.8m (focus on 'non-specialised equipment). No spend on software
- In second half FY2014, 'committed' capex on new equipment is 3.2m.

So there's already an 11m outflow of cash...

Asset sales were $9.9m for the half (which was the stated target for the full year), which are ahead of target.

Let's assume half of this figure for 2nd half asset sales, as "assets for sale" have decreased by 30%. So another 4.9m cash flow.
That's a 14.8m cash inflow

And finally, operating cash flow for the half was $11.4m.

The third quarter is always weaker (as recently stated), resulting in a 1.8m EBIT loss. Adjusting for quarterly interest payments (2.4m) and quarterly depreciation at the rate stated in the first half (5.5m), cash flow was 1.25m for the quarter... not great.

And assuming Q4 resembles Q1 and Q2 (as it has over previous years), cash flow should be 5.7m

Total Operating Cash flow for FY14 = 18.35m


Total cash flow = 14.8 + 18.35 - 11 = 22.15
Share price as a multiple of cash flow = 64m / 22.15m = 2.9 times

(This figure looks great, but how is my 4th quarter cash flow estimate? And will revenues fall further in coming years?

Linking the Two

The two sections above don't really flow, until you treat the first as the 'minimum required' on asset sales, and the second as 'expected' cash flow.

Of course, this is built on a few assumptions, these being:
- Assets can be sold at 57% of listed value
- Company can remain cash flow positive through operations
- Operating cash flow doesn't continue to plummet... 11.35m first half vs 26.9m pcp (Coal prices anyone? And will iron ore prices hit just as hard?)

Unknowns:
- Given 'wet-hire' (hire of cranes with labour and related equipment) requires staff on the books, how many crane operators are kept, and for how long, as work dries up?
- What percentage of revenue is not iron ore/coal related? (Can't find geographical split, and everything is listed as one segment)
- What impact have recent redundancies had (first half, 80 people made redundant, from 'over' 1000 employees)
- How reliable are assumptions/multipliers on current assets?


In summary: I think I still need to understand future cash flows a little better before I can make a call on this one.
Again, apologies for the long post...

I would very much appreciate if people could point out the flaws in this analysis - I'm treating it as a learning exercise.

Thanks

 

[Hoborg]

And I should have mentioned earlier, I investigated this after reading someone else's investment case, which can be found here:

http://socksorstocks.blogspot.com.au/2014/02/bought-boom.html

 

[KnowThePast]

If this is too long, I apologise. I'm simply posting my analysis here for anyone to pick apart (please do). Here goes...

Hi Hoborg,

That's brilliant, and very similar to the analysis I've done a few months ago, after which I bought some BOL shares.

The key, is, of course, to understand the future cash flows/profitability. I broke it down into 4 possibilities.

1. Things stay roughly as they are. Management continues to sell off assets at reasonable prices until they reach a base level that has an adequate utilisation rate and profitability.
2. Things continue to deteriorate, due to industry conditions and surplus assets. Management is forced into selling some assetse at a loss, possibly < 58% of value to stay in business. At some point, this has to reverse.
3. Things continue to deteriorate, due to company specific problems. This has a strong possibility of reducing value to zero.
4. Conditions or utilisation rate improves and reversion to mean occurs.

Placing a rough estimate on odds and value of each scenario made me comfortable that risk/reward ratio was good enough.

P.S. Given that the company is reducing maintenance spend, I would expect future asset sales to be at less favourable prices...

 

[sptrawler]

I was away caravanning in the wilderness, when I bumped into a crane driver. Being a BOL holder, I got chatting with him, I asked why Boom is struggling.
His response was Warren Buffet bought out Freo Cranes, and are undercutting everyone.

Well when I returned home, sure enough.
http://www.freogroup.com.au/

Have a look in the bottom left corner of the home page.

If Berkshire Hathaway, are subsidising Freo Cranes, Boom are going to struggle.IMO

I'm still holding, but nervous.

 

[peter2]

BOL Boom Logistics continues to struggle. Last year they had revenue of 185 Mill and lost money (-17M) again.

They've never recovered from the GFC. Since 2018 BOL has failed to get ahead. IMO management must be inept.

Is there a possible BO-HR of 0.11 ? It's not going into any of my portfolios.

 

[peter2]

Almost four years later.

I was right about that BO-HR as price did go as high as 0.21. Since then price has drifted lower once again.
However, lately price is rising once more. The chart looks a lot more bullish with the weekly higher low (HL) in place.

Has management taught this old dog some new tricks?