Ann: WAF: WAF Receives Strong Interest from Leading Debt Fin, page-3

LYL's people are going to be seriously busy little bees over the next 2 to 3 years.

A number of channel checks I've conducted with people I know in the engineering construction industry, reflect a clear message that capacity utilisation is virtually maxed out in several aspects of the EPCM chain - not just within the "CM" part, but also in the "E" and "P" elements.  (And not just in Australia, either; also across Africa, where LYL does a lot of business).

The logical consequence of this is the ability for pre-eminent operators, ones with excellent execution reputation such as LYL, to flex additional pricing power when it comes to bidding on new projects.

So its doesn't take too much exercising of the imagination to envisage a scenario after the current year whereby the company's Revenue is above $300m (Recall FY2023 guidance is for Revenue of $280m) and the NPAT margin approaches the 13% levels reached at the peak of the previous cycle, in 2010 (Recall FY2023 NPAT guidance is for $30m, implying an NPAT margin of almost 11%):





Those perfectly plausible post-FY2023 Revenue and Margin scenarios would result in NPAT somewhere around the $40m mark:




I'm not sure the current $260m market valuation [*] of the company is even close to factoring NPAT approaching $40m in the foreseeable future, given the implied 6.5x P/E multiple.


[*]  More like $220m or $230m (i.e., P/E of around 5.7x), if one reasonably assumes that just a portion of the $100m Net Cash balance is surplus to the business's ongoing operating  requirements.

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