That matrix that I posted that gives share value guesstimates...

That matrix that I posted that gives share value guesstimates for different assumptions of Revenue, NPAT percentage of Revenue, and Mr Market's Prices/Earnings Ratios is based on a mixture of facts and “feel”.

That there are 110 million shares held in BYL is a fact.  That management opined that revenue would be about $320M in FY2015 is a fact, but the opinion itself has elements of management's feel to it based on facts, plus my own feel that management has tended to be conservative. The NPAT % of revenue is a matter of feel, based on BYL's past metrics and what other companies have achieved. The P/E Ratio is also a matter of looking at the sector and at BYL's qualities, and picking a reasonable range of possibilities.

The resultant guesstimated metrics are interrelated. For instance, the amount of work that BYL should sensibly accept, is less than what it seems it can easily secure (going on recent history), and so one can simply select a number for that. The more selective that BYL is, the higher the NPAT margin can be, although this only impacts work other than the $250M that management has stated to be on the Order Book for FY2015. Also, the P/E Ratio would tend to rise if the EPS rises. This last point is what excites me – if to be conservative, I suggest the share value is 60 cents, I could be understating its value by over 100%, as my earlier-posted matrix suggests. Let us look at the individual components of that matrix.

Share Tally

The number of shares has been 110 million since the company was floated.

Revenue

The 17/07/2014 Announcement stated, “Forecast revenue for FY2015 of $320 million.” and it stated, “Brierty’s total order book stands at $570 million, of which $250 million relates to FY2015.” Thus all that BYL requires is another $70M to reach the $320M. I do not know the value of BYL's sub-$15M contracts in FY2014, but in FY2013, BYL secured $74.2M in small contracts valued less than $15M each, and of these, revenue was $72.9M – that is, not much spill into FY2015. If one adds $70M to $250M, one gets the target $320M for FY2015. However, what about new larger contracts that will start in FY2015? I think we can safely assume that revenue should fall in the $320M – $350M range, with $350M a more likely outcome than $320M, in my opinion. The $17 million contract for Perth Airport executed in July leaves $53M yet to be secured and finalised in FY2015 of the $70M new-contracts target.

NPAT Margin

BYL's reported NPAT margin has in recent years been low, and I suspect that some longer-term hangovers from the ante-McBain years may be the reason. Bellamack and Karara contracts are known to have been below-average-margin contracts, and they both expired in FY2014. If you look at 2HY2014, you will notice the NPAT margin was 5%. Consequently, the range of 3.5% to 5% used in my matrix is conservative. Also, if BYL is more selective (because it has a strong Order Book) it should improve margins on new contracts.

5% NPAT margin is not high – I am too frightened to think what might happen to EPS and share value if I selected a higher percentage as a possibility. Consider NRW Holdings (NWH) and MACA (MLD) – to wit:

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7
0	NWH	2008/06	2009/06	2010/06	2011/06	2012/06	2013/06
1	Revenue per share ($)	1.95	2.06	2.46	2.91	4.85	4.91
2	EPS (cents)	16.9	14.9	15.1	16.1	34.7	26.5
3	NPAT margin	8.67%	7.23%	6.14%	5.53%	7.15%	5.40%
4	MLD
5	Revenue per share ($)	--	--	1.03	1.77	2.16	2.94
6	EPS (cents)	--	--	13	19.3	24.4	30.7
7	NPAT margin			12.62%	10.90%	11.30%	10.44%

Price/Earnings Ratio

Although one can find reports that suggest Price/Earnings ratios for small companies average about 9, the variability is so great as to make the average meaningless. The average for the smaller companies in this sector was 8.9 according to a report at dated February 2013 – see http://www.euroz.com.au/files/research/4469/WA Industrials Research Feb 2013.pdf

I think that in the current setting, the 6-to-9 range that I used is reasonable for now. SWL (Seymour Whyte) which is similar to BYL in many respects, has a P/E Ratio of 16+, so a P/E Ratio of 9 is not exactly pushing the envelope.

Conclusion

There are many other factors, like CAPEX, Balance Sheet quality, management, and the macro environment facing BYL, but none of them threaten the picture I have painted for BYL, and I'll address any that are raised for discussion, because I have looked long and hard at BYL.