aas thoughts re:bsa

A none share-investing friend asked me about BSA and why i invested I sent her the following summary and my personal thoughts .........
I combined some of robbos excellent research and wise words in the email i sent her.

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Note: this is not advice, but just my own personal view... right or wrong re: BSA when @ 73c


BSA: They do Broad Band Connections etc e.g ADSL,They are the largest connector of Antennas, satellite Receiver Dishes and have a 20 year Trademark Franchise Mr Antennae.

BSA’s business model is really training and managing skilled technically oriented subcontractors, Also BSA is a ISO 9001 certified and is an accredited Registered Training Organisation, the company manages around 1,400 people performing more than 120,000 jobs per month.

Brian Baldwin (BSA founder) is also the Chairman and founder of Australia's privately owned Recruitment Company - Challenger Recruitment.


In my opinion what sets BSA apart from most Outsourced Labour companies is the same organisation can train its own contractors as needed - critical for a growing business.

I believe this gives them a advantage and an edge over other companies like..... Structural Systems, Manpower, the Drake Personnels etc, who cannot offer this level of Accredited Training and Apprenticeships.

So in summary i believe BSA's Training ability helps replenish an industry with a well documented skills shortage and that BSA has a competitive advantage over "all" its competition.

BSA is the Labour Supplier, Trainer and Manager for Telstra, Foxtel, and Main clients are also Optus ,Austar, Hutchinson and '3'

Demand and profit margins, I believe are sustainable and will likely improve, for example penetration of cable TV is 25% currently in Australia, in the USA it is 64%.

Foxtel I see today on the net advertising free installation (Foxtel paying for technician not consumer) which must be good for BSA in increasing the amount of work they receive from increased uptake of these packages.

Additional technologies are constantly being upgraded which require technicians to install.

For example there have been Labor election promises to re vamp to high speed broadband to the value of $10 Billion dollars.(how much of that would BSA need to grow from its 117 million market cap ;) )

BSA has just past the 100 million market cap range the minimum for many fund managers who are often limited by various rules, one being market cap , I have seen this happen time and time again.... after companies like BSA have reached the 100 million MC they explode driven my funds buying into a tight registers like BSA's.

Given the excellent earnings history of, and the predictable locked in future earnings.... contracts of, ........BSA in my opinion will become hugely sort after by Insto funds once the super conservative companies forecast(BSA) of 13 million ebitda earnings finally become fact, ( as the funds need fact and social proof to justify the action to their..... ) and it will be announced before August 30th.

Which now leads me to the unbelievable IMO hugely undervalued nature of BSA,

In the BSA Published Newsletter March 2007 Page 2(see asx announcements... www.asx.com.au)
Quote:

Those core businesses have consistently achieved earnings growth over the past four years and, together with the continual improvement in operational costs, I (Mark Foley-- Managing Director)-- have great confidence that ongoing earnings growth can be maintained.

Accounts for the first half-year indicate an outstanding result of $7.2 million Earnings Before Interest Tax and Depreciation (EBITDA).

That's well above our budgets set in May last year.
........................................................................................................................................................................................................
*We are now expecting to achieve an earnings target of:

"MORE THAN" $13 MILLION EBITDA for the full financial year 2006/07.
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I have been in contact with the company as have 2 other share investing friends:

we were told by the company the $13million ebita Previous Guidance is a under-estimation and is consistent with a policy of Under Promising and Over Delivering.

I believe BSA will (probably???) discuss whether to issue a further Profit Up-grade. Im told the board meets at the end of the second week of the month.

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BSA has No Debt to speak of and Excellent Free Cash flow and a strong Balance sheet.

So some calculations.....

MORE THAN 13 Million ebitda >>>>>>> 9.7-10.2+ Million NPAT expectation,


But im going to work on 9 Million NPAT

Working out the likely future BSA P/E (price per earnings ratio) rating is the hardest part.

Things which may dictate future P/E ratios may be: earnings accretive acquisitions(I expect one), Another increase in the Fully franked dividends which sends a strong signal regarding Free Cash flow going forward, Institutions/Funds that start to join the Tight BSA share Registry, BSA formal reporting of a number more than 13 million ebita(expected) (August), Locked in future earnings such as the Foxtel announcement just released e.g 300 million over 4 years.... Yep thats 300 million locked in predictable future earnings and almost 3 times BSA's current Market Cap @ 73c (starting to get it?).

Current BSA P/E rating is 27,

(update: just looked now accually today it is
P/E28.73 @77c)

9 million NPAT times 27 = new market cap of 243 million .... So easy more than double your money(current market cap 117 million)

Safety Test= 9 M NPAT times P/E 13= 117 million(current MC), P/E of 13 is "way to low for this company and not going to happen", therefore BSA passes the safety test with flying colors , I always look at the downside "first" and safety when accessing shares... before even looking at the upside potential.


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Taking educated risk but utilizing risk minimization is critical in my opinion.

The biggest risk in life.... is not taking one.

Of-course Fundamental Analysis (FA)is only half 50% of a good decision in share-investing, like property it is the Location, Location, Location bit.(in other words where to best locate your capital)

Technical Analysis(TA) is the other 50% just like property... timing is everything.(although more important in shares IMO)

A good TA System keeps you in a share only while its going up, and the system should sell you out before the company price trades sideways or down. Therefore capital is Always moving.. "always moving up and growing" and always growing in the best location.

Time is money and opportunity loss is significant. Invest in the best companies in there "best time frame"


Most professional investors still fail to use FA and TA together.


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Regards


AA

(the above opinions are AA's alone and may not be correct this is not advice)