BAL's 1H trading update was exceptionally strong. The important...

BAL's 1H trading update was exceptionally strong. The important thing now is to try and estimate what the FY result could be given the new information we have. I've built a simple model for BAL that tries to take account of the bottom line benefit to the company from the 20%+ price increase that was pushed through in November and will give a big boost to 2H. The model is conservative in that it assumes no volume growth (and, relatedly, costs related to volume also do not change).

In short, EBIT should increase to around $38m in 2H16, from $19m in 1H16. This translates toFY16 NPAT of $40m. Annualising 2H16 NPAT of $26m gives us annual earnings of $52m and brings BAL's PE down to just 22x! For a company on track to more than double sales and five-fold profits this year.

I can only see BAL going higher...no wonder Fidelity has been buying.

	Column 1	Column 2	Column 3
0		1H16	2H16
1	Sales
2	Sales ($m)	105	126
3	Cost of sales	66	66
4	Gross profit ($m)	38.8	59.8
5	Gross margin (%)	37%	48%
6	Less: expenses
7	Distribution expenses	11.5	13.8
8	% of sales	11%	11%
9	Employee costs	4.9	4.9
10	% of sales	5%	5%
11	Marketing & promotion costs	1.0	1.0
12	% of sales	1%	1%
13	Admin	2.1	2.1
14	% of sales	2%	2%
15	Operating expenses	19.6	21.9
16	EBITDA[/B]	19.2	37.9
17	DA	0.2	0.2
18	EBIT	19.0	37.7
19	Less: tax	5.7	11.3
20	NPAT	13.3	26.4