Bought more

Years ago I repeatedly considered Cedar Wood (CWP), Seymour Whyte (SML) and BYL, but did not invested in them. In mid 2013 I changed my mind, and I invested in BYL, and I have since accumulated, thanks to Mrs Brierty keeping the SP low. On Thursday I peeked at CWP and SML, which strengthened my conviction that BYL is a no-brainer for me at 40 cents or less, so I bought more on Friday. CWP often engages BYL in housing-estate work. BYL's nexus with SML is that both upgrade highways and airports, with BYL substantially focused on Perth and its hinterland, and SML substantially focused on Brisbane and its hinterland.

CWP ticks all the boxes, except it is fairly valued (P/E ratio stated as 13.68). BYL's smaller capitalisation is a relative negative, but its low SP compensates for that. A few years ago I would have dismissed BYL because of its low capitalisation and high debt, but I have since shifted my views on both these issues when short-listing – that is, my investment-candidate trawling filters are now more lenient, and focus has shifted to scrutinising each candidate. Debt toxicity varies greatly, so each stock's reported debt must be viewed individually, and there may be underlying characteristics that compensate for low capitalisation and relative illiquidity.

SML's metrics conduced me to conclude that BYL is undervalued and SWL is overvalued.

- - - - - - - - - - - - - - - - - - - - - - - - - - -BYL - - - - SWL
Share Price 10/07/2014 - - - -- - - - - - $0.40 - - - $1.91
Capitalise value - - - - - - - - - - - - - - - $44M - - $167M
Share Tally - - - - - - - - - - - - - - - - - - 110M - - - 77.8M
Equity as at 30/06/2013 - - - - - - - - $52.5M - - $46.1M
2014 Est Revenue - - - - - - - -- - - - $296.7M - - $350M
NPAT - - - - - - - - - - - - - - - - - - - - - - $8.9M - - $10.5M
NPAT/Revenue - - - - - - - - - - - - - - - 3.00% - - - 3.00%
EPS (cents) my estimate - - - - - - - - - - - 8¢ - - - - 13.5¢
DPS (cents) my estimate - - - - - - - - - - - 3¢ - - - - - - 6¢
Order book (announced recently) - - $570M - - - $200M

There are many other factors like debt ratio, cash flow, management, and the macro picture relative to the two companies, but whatever you consider, I doubt if you would hold that BYL's SP should be only about a fifth that of SWL – half is probably reasonable. For now I'll stick to the 50¢ valuation for BYL that I mooted a year ago, which, sadly for SWL holders, suggests that they should expect the SP of SWL to decline further.

Reading posts on the SWL thread suggests that the closest the posts get to SWL's business performance and prospects is to comment on the macro environment (infrastructure spending earmarked by politicians), with most posts focussed on the SP, evil gnomes who downward manipulate the SP, and the gutless prudential authorities who fail to eradicate the gnomes.