the winning edge

Psychologists distinguish between hard skills and soft skills, so I'll distinguish between hard and soft reasons for investing or disinvesting in stocks. The former include things unique to a stock that can be expressed in dollars, or ratios thereof, even though they include subjectivity, as estimates do. The latter reasons are usually thematic – e.g., the macro environment, director buying or selling, etc.

On BYL, we have probably exhausted opining on the hard reasons to buy the stock, and likewise some soft reasons like the WA-iron-ore theme. Although I have mentioned the Aboriginal-advancement theme, I want to flesh this out in this post, because my gut feeling is that this, the “A Factor” is going to make a favourable-to-BYL difference in winning contracts in tight tendering situations. It's like adding a trace element to a deficient soil – adding a little of what is deficient delivers a transformational reward.

The first source of relevant information is BYL's own reports, which shows how important the A Factor is to BYL's management. Simply extract a few recent reports and search for the word “Indigenous”, and you will find a great deal on the topic. The 2012 annual report states “One of the benefits of our leadership in indigenous engagement is assisting our clients to achieve the targets required under their various agreements with traditional land owners.” The 2013 shareholder presentation states “Indigenous partnerships in place for new projects and for maintenance and rehabilitation work in the Pilbara”, plus “Indigenous employment remains strong with focus on JV’s and partnerships”.

BYL has two joint ventures – one with Ngarluma Yindjibarndi Foundational Ltd, and the other with Kalayura Construction Services Pty Ltd. Like many other organisations BYL has a formal so-called Reconciliation Action Plan, which can be seen at:

http://www.reconciliation.org.au/getfile?id=121&file=Brierty+Limited++2013+RAP.pdf

RAPs are being adopted by other mining companies, Government agencies and local councils – entities that issue requests for tenders pertinent to BYL's services, and I would suspect that the tender documents and evaluation scorecards would have an Indigenous-advancement component. In areas covered by traditional ownership, the matter of Indigenous advancement would be specific to traditional owners.

An Internet search finds RIO's RAP at:

http://www.reconciliation.org.au/getfile?id=121&file=RT_RAP_FA3_lores+new+logo.pdf

and BHP's RAP at:

http://www.reconciliation.org.au/getfile?id=121&file=BHP+Billiton+2013-2015+RAP.pdf

Twiggy Forrest of Fortescue is in the thick of this matter. Although I did not locate a Fortescue RAP, you can be sure there is one, or an equivalent. Various shire councils and government agencies have RAPs too.

Searching the Internet suggests that BYL and NWH have very good A Factors, and this may have subconsciously tipped my mind in favour of them when I was looking for a contrarian punt on mining service stocks, although their low P/E ratios were the sockdolager. both companies have joint ventures with Ngarluma Yindjibarndi Foundational Ltd.