Many similarities to the early re-rating of TOX here...Monopoly...

Many similarities to the early re-rating of TOX here...

Monopoly market/first mover advantage...both servicing high-margin niche markets with few competitors due to restrictive licensing/safety/expertise issues.

Prohibitive entry factors for competitors...high cap ex requirements, limited availablilty of expertise.

Growing client base...energy sector related, previously considered "uneconomic" narrow coking coal seams are now viable and in some cases, preferred by refineries due to their typically higher metal content.

The very existance of each company effectively expands possible project opportunites due to the nature of the markets they are addressing.

Profit projections not headed by the market due to previous "credibility" issues...in TOX's case, it was previous losses and failure of their earlier business model...in BNT's case it was the profit downgrade from $6m to $5m net profit for 2006. (arguably, the market over-reacted here?)

Growth prospects for both companies apparently not being factored in by the market.

Interestingly, BNT could well finish with net profits significantly over $5m for the year...and at a stretch, may even get close to the intial $6m target?

Apart from the fact the initial sell-off was way over the top...the market seems to be missing the point that they are making some $4.2m net profit for the second half, most of which will occur in just the last 4 months...assuming that's about $3.5m, this equates to some $10.5m net profits on an annual basis....and this is without a single new contract.

Remember, the first 8 moths of the year have been effected by unusualt circumstance...the profits for the last 4 months should continue into and beyond 2007.

Just 1 or two reasonable new contracts should see BNT net well over $12m in profits for 2007...remember, just about every major coal deposit in the country has at least one thin seam that to date, has typically been overlooked.

Anyway, as the company has stated (and re-stated several times) 2006 EPS should be around 6cps and 2007 about 15cps.

Given it will be a rapidly growing market with little if any competition and typically longer contract terms, a PE of 10 is probably more than fair (perhaps conservative), but for the sake of the argument, I will apply PE's of 5, 10, 15 and 20

PE = 5x
2006 - 5x6cps = 30c
2007 - 5x15cps = 75c

PE = 10x
2006 - 10x6cps = 60c
2007 - 10x15cps = $1.50

PE = 15x
2006 - 15x6cps = 90c
2007 - 15x15cps = $2.25

PE = 20x
2006 - 20x6cps = $1.20
2007 - 20x15cps = $3.00

It is perhaps interesting that at the current price of 39c, they are trading on a PE of just 6.5 on 2006 figures (just 3 months left), with little if any consideration for; new contracts; growth either organically or via acquisition; forward inclusion of 2007 incomes or; the ever increasing cost of high quality coking coal and the obvious flow-on effects for BNT.

So why the low share price?

Well...the market is not silly...BNT announced a profit downgrade late last year, so the market acted accordingly. In light of the downgrade being from just $6m net to $5m net, one might argue the sell-off was way overdone?

Perhaps so, but I suggest the selling was not just about the 16% profit downgrade...it was more about declining "credibility"...BNT will now need to earn this back once again.

Just like the way the market was a little slow reacting to the turn-around in TOX...I suspect the same is happening here with BNT.

Cheers!