BRS 1H16 shoots the lights out, page-30

I'm optimistic re 2H16 earnings but its nothing compared with M.Star's update (see below). I say FY16 14.9c, they reckon 17.1c!!Yet they rate management poorly (still think its the previous crowd) and are concerned that BRS only have a 67% chance of renewing DIBP contract. Yet they have incredible EPS for FY17.

'Broadspectrum reported better-than-expected first-half fiscal 2016 underlying earnings of AUD 27.9 million. Given this, along with increased underlying EBITDA guidance of AUD 280 million-AUD 300 million, we increase our fiscal 2016 underlying earnings forecast by 20% to AUD 88 million, or AUD 0.17 per share. This assumes that the company achieves the lower end of EBITDA guidance, as the resources business is likely to continue to struggle and we don't anticipate any major or rapid bounce back in earnings in the next two years. Furthermore, the improved profit result comes via substantial cost savings, not via revenue growth, and cost-cutting can only go so far. We are maintaining our no-moat rating. The chequered track record and strong customer bargaining power work against the establishment of a sustainable competitive advantage.'

Key Ratios

	Column 1	Column 2	Column 3	Column 4	Column 5
0	Years	06/14A	06/15A	06/16E	06/17E
1	NPAT ($Mil)	72.5	71.8	87.8	99.1
2	EPS ¢	14.2	14.0	17.1	19.3
3	Change %	85.6	-1.0	22.3	12.8
4	DPS ¢	0.0	0.0	0.0	0.0
5	Franking %	0.0	0.0	25.0	30.0
6	Yield %	0.0	0.0	0.0	0.0
7	P/E	7.1	11.0	6.7	5.9
8	ROE	8.9	6.2	9.9	10.2