FY18 result - North of 40 cents seems reasonable

BOL reported 100% earnings growth, beat Revenue and Earnings guidance (which they didn't flag), delivered a strong cash flow result leaving the balance sheet now fully de-geared and guided to another circa 50-60% earnings growth. Yet despite this the stock still only trades on 4x EBITDA versus 6-9x historical levels since listing 15 years ago and at a large discount to peers. So despite earnings momentum being exceptionally strong, material capital management optionality which they flagged, a risk profile greatly improved and management guiding to another very strong FY19 the stock has failed to re-rate.

Given BOL's financial characteristics, a 7-9x EBITDA multiple seems reasonable which implies a share price well north of 40 cents ($25m net debt FY19, EBITDA of $33m). 7-9x seems reasonable as BOL has historically traded in this range, its peers do and BOL is under-earning so a higher multiple is justified.


I think it is always worthwhile considering what is depressing a stock's earnings multiple and trying to gauge whether that will change.

Reasons include for me from Results reactIon:

1. Step up in capex may concern the market (although it still trails D&A): Expect this sentiment to change as market digests the tightness occurring in the industry and the highly attractive incremental returns these asset will generate over the next few years. This tightness was highlighted by ECX's recent commentary that equipment sales have slowed as all kit is now in use!! Price rises to come!! No industry investment has occurred in the last seven years, BOL by virtue of its strong financial position can invest to reap these attractive returns. You want to invest now, not in 3-4 years.

2. CEO change: Knee jerk reaction by the market. Expect this to change over the next few weeks. Tony is a great operator with passion for the business and he has a better understanding of capital management than preceding management teams. This is also an internal hire with a managed transition which is much lower risk.

Catalysts for the stock to re-rate:
1. Investors doIng the work on the stock (cheap, great momentum, BS strong and attractively positioned within the industry). Management wIll be meetIng Investors over the next 2 weeks.
2. Buyback: ThIs would be hugely value accretIve (low earnings multIple, discount to undervalued assets).
3. Acquisitions: Great opportunity to acquIre struggling operators on low earnings multiples and at a large dIscount to NTA. ThIs looks like it is also being actively canvassed and they now have the balance sheet Flexibility.


On a Revenue to Crane and Travel Tower basIs there is significant Revenue upside from increased utilisation. These assets are nowhere near fully utilised. applying scaling such as this is a great way to avoid accounting issues ruining the analysis. In this case, they highlight how absurdly low asset values are on the balance sheet (i.e NTA is significantly understated).