After a few months when BYL landed no contracts, it picked up a...

After a few months when BYL landed no contracts, it picked up a small contract in November, and as Johnmcgee pointed out yesterday, two contracts have been secured in December. The two latest being:

• T1 Forecourt Road, Carpark and Services – Client: Perth Airport
• New Perth Stadium Miscellaneous Earthworks – Client: Brookfield Multiplex.

With a fat Order Book, the recent hiatus did not concern me, but its good to see tiddlers added to the pail. Historically, BYL has tended to secure about two small (<$15M) contracts a month worth about $80M a year. This may be a little less in FY2015, because of a few >$15M contracts secured in late FY2014 and the $17M Perth Airport contract secured in July 2014. The July 2014 contract was the 19th Perth Airport contract, so the December 2014 Perth Airport contract is the 20th.

With $250M of work for FY2015 being in hand on 1 July 2014, I remain inclined to forecast Revenue for FY2015 at $320M, which is management's prediction in a July announcement. I think NPAT should be 3.5% of that, or $11.2M. EPS should be $11.2M/126.5M = 8.54c, and DPS at 3c would be 34% of EPS, and hence fall within the so-called “practice” of holding the dividend payout ratio within 25% to 35%. I would not regard that “practice” to be cast in stone, because if Revenue flattens in future years, CAPEX would flatten too, and consequently, 3c dividend should be secure for a while. At an SP of circa 40c, that is a yield, including franking credits, of 10.7% – good enough for me to buy as a dividend-supported punt that there will be capital gains down the track (not that the logic worked for me in respect to NWH).

Some weeks ago Alonso asked if I would consider buying more BYL, and I said that I was not keen because I had so many BYL shares, but I may do so, and I mooted that the DPS should hold at 3c, in spite of the share dilution. I now have greater conviction that BYL is likely to pay 3c DPS for FY2015, and so I bought more shares at an average of 39.4c, rounding my holding to a million BYL shares. I take large risks when investing, so I would not advocate that others follow the path that I have taken, especially as BYL is a relatively illiquid stock. I tend to hold shares for years on the basis of dividend yield, and consequently, I am more comfortable investing in illiquid stocks than investors whose focus is on potential capital gain in the near future. The recent acquisitions should deliver a with-franking-credits yield of 3c ÷ (39.4c x .7) ≈ 10.9%. The SP may well decline in the current doom-&-gloom climate, but as I am hopeless at picking the bottoms and tops, I decided that as long as I did not pay more than 40c, I would jump in.

Because I am so overweight with TGA, I sold circa 8% of my TGA holding at an average of $2.962 to fund the BYL purchase, and to increase my holding of another stock.