annual report, page-5

Seconds after I sent my previous posting, I received the below report from Bell Potter - just confirming what I was talking about. Here it is:



FY10 result: Getting ready for peak demand
#„ Earnings changes
Boart reported FY10 EBITDA of US$220m, broadly in line with guidance and UBSe driven by recovery in services utilisation and product volumes. FY11 EBITDA guidance of US$300m, implies 35% growth on last year. Our forecast remains c.10% higher due to better margin, although we note the company?s record of being conservative and subsequently expect upgrades through the course of 2011 as visibility around demand continues to improve.
#„ FY12 to reflect peak conditions
We expect earnings in the current cycle to peak in FY12 driven by: 1) Rig pricing as post-GFC contracts continue to be renewed at higher rates; 2) Higher fleet utilisation as junior miner demand returns (currently only 10% of revenue vs 20% in previous peak); and 3) Higher capacity utilisation in the consumable products business.
„# Trading at fair value despite strong leverage
Boart provides leverage to the uptick in global growth over the next few years as earnings continue to recover strongly due to rising global mining capex budgets. The stock has historically traded on 10.5x through the cycle EBIT, which sees fair value around A$4.70 based on our FY11 mid-cycle earnings, which also accords with our current DCF valuation and price target.
#„ Valuation / Price target A$4.70 (unchanged)
DCF valuation remains unchanged