nta at 31/12/2013 was 50¢

I read a post made by Rambo23 that impressed me, so I looked up a few more of his posts, and the one posted: 08/11/13 12:07 in the ASL thread struck me as apt for BYL, because BYL's NTA of circa 50¢ is one of the soothing factors in my punt on the stock for the following reasons:

? BYL's NTA was higher than its SP
? Bulldozers and similar items have a robust second-hand market, so the NTA for them is usually realistic.
? The equipment items are typically under 5-year hire-purchase agreements, so the debt attached to them decreases over time.
? If the work declines, CAPEX drops dramatically – hence improving cash flow.

Consequently, even a bad-case outcome for BYL would not be as bad as Mr Market thought. I'll not repeat my often-harped-upon reasons for expecting BYL to do better than the worst-case scenario, so back to Rambo23.

We humans are a weird mob – most of us think we have above average cleverness, and when we read views that accord with our own, we tend to ascribe a high IQ to the author. Anyhow, this is what the clever Rambo23 wrote in the ASL post mentioned:

“For a lot of companies, especially manufacturing, assets are almost worthless if you are liquidating - no one else will buy them.

However, one of the main investment arguments for mining services companies is they have a lot of capital tied up in yellow goods - trucks and the like.

There is a very active secondary market for these items and they have traditionally sold for book value (ASL has about $800m). Even in this distressed time they are selling close to book and the peak of the GFC (a time of massive surplus) they still sold at around 80% of book.

Even if they don't sell them they depreciate very quickly so as long as they don't replace them (which Ausdrill mainly won't) then the company will continue to generate free cash flow.”

I have in a previous post argued that one can have more confidence in BYL's NTA than BOL's NTA, because what Rambo23 aptly calls yellow goods are easier to dispose at fair value than BOL's specific-purpose cranes. Anyhow, for long-suffering BOL shareholders, Rambo23's post of 12/02/14 23:06 in the BOL thread may give heart to those with patience.

For the record, BYL's NTA history is:

Jun 2011 – Dec 2011 – Jun 2012 – Dec 2012 – Jun 2013 – Dec 2013
- 33.60¢ - - - 39.40¢ - - - 41.44¢ - - - 44.60¢ - - - 47.76¢ - - - 50.00¢