broker call buy

ords have the following

Boart Longyear Limited (BLY A$0.32), Buy
FY09 Result: A new upgrade cycle?
􀂃 BLY reported FY10 earnings that were operationally ahead of our expectations, although a higher interest charge meant that
adjusted NPAT of $US7m was actually below our US$10m estimate There was no final dividend announced we had
forecast a US1 dividend.
􀂃 Operationally the result was better than anticipated EBITDA of US$128m was 8% ahead of our estimates, driven by Drilling
Services which was ~20% ahead of our expectations. Drilling Products again disappointed vs. expectations.
􀂃 Guidance likely to prove conservative FY10 guidance for revenue of US$1,125m (15% growth) and EBITDA of US$170m
was provided. We believe that the guidance is likely to prove conservative given the early stage in the year and the
uncertainty ahead.
􀂃 Miner equity raising suggests a positive outlook While current high commodity prices are important, exploration must be
funded. For explorers with no existing cash flows, funding must be sourced from equity. Importantly, our analysis shows that
junior miners (mkt. cap. will be used to fund exploration and development budgets, directly boosting demand for drilling services.
􀂃 A return of the upgrade cycle We expect that 2010 and 2011 will see a series of upgrades to both company guidance and
analyst estimates as activity levels build and operational leverage boosts earnings. We have attempted to stay ahead of this
upgrade cycle and increased our forecasts accordingly. We have upgraded our forecasts for FY10, FY11 and FY12 by 9%,
24% and 31%,
􀂃 We expect that improving activity levels and upside from an under-geared balance sheet will support BLY throughout 2010.
With upside towards our 44 valuation and a support from key thematics around the resources sector, we see attractive
upside in BLY and maintain our recommendation.