Now an Asset Play, page-28

There is virtually zero chance of NWH going into insolvency, so we are not really concerned with liquidation values. If we are, then we also need to figure out redundancy payments for 3000 employees and contractors, quite apart from the PPE, which comprise mainly yellow goods that could be sold into an international market.

The fun part about these lousy businesses is that they spew cash when business is going down, and they chew up cash when business is good.

For the last two years, NWH operating cashflow returned $100m per annum. Even if they return only half of that for the next few years ie $50m of cash per annum, which could arise from any combination of earnings cashflow (even at thin margins) and gradual asset sales, shareholders at current prices will be getting a very decent return with very little risk if they maintain a consistent payout ratio in dividends. Which is where the $50m of franking credits could be useful.

There are at least three major iron ore mines that are scheduled to be built, apart from infrastucture spending which has yet to get going. With a strong balance sheet and locked in work for at least another 1.5 years, NWH can survive for a few lean years. By that time, a lot of mines would have been depleted, and the world will suddenly realise that Australia must continue to build mines.