To add to my previous post, if, and that may be a big if, the...

To add to my previous post, if, and that may be a big if, the Clough-led consortium wins the Airport Link work, a fair percentage of the actual work should fall to BYL, because BYL is very much a sleeves-rolled-up company that relies on its people and its equipment fleet to do the grunt-work, rather than being a consultant and/or substantially a coordinator of subcontractors.

Although BYL tends to work alone, or with junior JV partners, it also gets into deals with higher-level companies like Bocol Construction, AECOM and Clough. In respect to teaming with Clough for the Airport Link tender, I noticed tonight that Clough and BYL worked together on an EPCM (engineering, procurement, and construction management) contract for Newmont Gold Corportation in the 2006-2009 period. Clough is a subsidiary of the South African based Murray & Roberts.

On a matter of a crude valuation of BYL, the capital-intensive and employee-intensive nature of the company means it is unlikely to enjoy a Price/Earnings Ratio (PER) that exceeds 7. As BYL has a good dividend-paying history, and its PER is about 4, and it has a fat order book, it is an investment with more upside than downside, IMO.

I wrote on 14/06/15 that I expected EPS to be 8c and DPS 3c. Using an SP of about 30c, BYL's PER on an EPS of 8c is below 4. Guesstimate your own EPS for FY2015 and select a PER, and derive your own valuations and conclusions. The table below is a rough picture.

EPS→ .... 6.0c ........ 6.5c ........ 7.0c ....... 7.5c ....... 8.0c ....... 8.5c
PER↓
.. 4 ....... 24.0c ...... 26.0c ...... 28.0c ...... 30.0c ...... 32.0c ...... 34.0c
.. 5 ....... 30.0c ...... 32.5c ...... 35.0c ...... 37.5c ...... 40.0c ...... 42.5c
.. 6 ....... 36.0c ...... 39.0c ...... 42.0c ...... 45.0c ...... 48.0c ...... 51.0c
.. 7 ....... 42.0c ...... 45.5c ...... 49.0c ...... 52.5c ...... 56.0c ...... 59.5c

If for now one excluded the 6.0c and the 8.5c Columns, and the PER = 7 Row, one would end up with a valuation range between 26c and 48c. The underlined words “for now” imply this should change when we can read the Annual Report, and it would change again if a good contract win is announced in coming months. Where the SP ends up some months hence is going to depend on the EPS that investors can reasonably guesstimate for FY2016 and beyond.