Capital3157 again great analysis. I think your insights are...

Capital3157 again great analysis. I think your insights are really value adding.

I did pick up on the Chairman's reference to a return to dividend paying at the December 2020 half year.

You will recall the EGL 3 year strategic plan. The key shareholder takeaways were revenue of $50m by FY 20 and an EBIT margin of 8%.
Whilst they have missed both targets for FY20 I am prepared to be gracious and acknowledge that the revenue target should be readily achieved in FY21. So EGL Board and management take a bow. Well done.
Turning to the all important EBIT margin. Capital3157 as you note, with the real prospect of revenues exceeding $50m there is a stronger likelihood that EBIT will exceed $4m (8%) in FY21.
Assuming FY21 revenues are in the range $50m to $71m and EBIT margins in the range 6-8% then you derive a FY21 EBIT in the range $3m to $5.6m. Interest expense in FY20 was $412k say $450k going forward (higher volume of work requiring bank finance). EGL had significant tax losses with more brought to account in FY20. So with no tax to pay ( and forgetting the nonsense of accounting income tax expense) the effective NPAT should be in the range $2.55m to $5.15m. Assuming a midpoint NPAT of approx. $3.8m you get EPS of about 1.8 cents per share.

Given the Chairman's very positive comments on the prospects for EGL Water you would like to think that EGL should trade as a growth company. But not getting carried away, let's assume an orthodoxic boring industrial P/E of 8x. This gives an implied value of 14c per share. Being a little more positive and acknowledging the Company's growth prospects as setout in the FY20 Annual Report and the significant upside for EGL Water you could assign a P/E of,say,16x. That gives an implied share price of approx. 29 c per EGL share.

There is only one unknown !!!!. The ability of the EGL Board and management to deliver.

DYOR
IMO
Clare