Bought more, page-11

The margin does not have to improve for the SP to increase, because the SP should reflect the EPS, and increased EPS can flow from increased revenue at a constant margin. In my guesstimates I have tended to use a 5% pre-tax margin, which at a tax rate of 30% yields a normalised NPAT margin of 3.5%. For a revenue of $320M (as stated in a 17 July 2014 announcement), this yields an EPS of ($320M x 3.5%)/126.5M = 8.85c, and a payout ratio of about 34% delivers a DPS of 3c. BYL's stated payout ratio is “between 25% and 35%”. Of course, one does not know how reality will pan out.

At an SP of less than 40c, the current PER on my guesstimated FY2015 EPS is very low, and with a fully-franked DPS likely to be 3c, the dividend yield is high, in spite of the low dividend payout ratio. BYL delivers an acceptable ROE of about 16% (16.7% for FY2014). The SP in my opinion is unlikely to hover below 40c during calendar year 2015. 50c+ would seem reasonable to me.

As an aside, the metrics that one finds in sites like COMSEC are from Morningstar. They are flawed, probably because somebody forgot the increase of the share tally from 110M to 126.5M, and so the forecast EPS of 10.5c and DPS of 4c for FY2015 are too high.

On the matter of guesstimated revenue, in the absence of an announcement to the contrary, there is no reason not to accept the $320M mooted in the 17 July 2014 announcement, which stated, “With this strong platform in place, Brierty expects to deliver approximately $320 million in revenue for the financial year ended 30 June 2015.” The contracts in hand for FY2015 were stated to be $250M, and the 8-July-announced Perth Airport contract was worth $17M, leaving BYL to find work in FY2015 of another $53M, which is not a tall order, because BYL secures and executes many sub-$15M contracts a year, usually worth $70M-$80M a year that are not announced to the ASX. These may be lower in FY2015, but $53M should be achievable.