western turney, page-6

I am inclined to agree with Johnmcgee – the SP may lag fair value for a long time.

For companies that I hold, I focus on their long-term dividend potential. By definition this means considering its EPS trajectory, payout ratio, balance sheet strength, cash flow and other things. Hence if a stock like BYL looks like it can pay a fully franked dividend of say 3¢, rising to 5¢ in two or three years, then when DPS gets to 5¢, and I bought at say 35¢, my before tax yield woud be (5¢ ÷ .7) ÷ 35¢ = 20.4%, which would make me happy, irrespective of the then ruling SP. If at that time the EPS were 10¢, and growing, then the SP would tend to say 70¢ to $1.00, depending on the growth outlook then applicable. If the SP then remains below 70¢, I'll hold (other things being equal). If the SP goes over $1.00, I would consider selling to fund another undervalued stock. If in the shorter term a fat-tail event occurs (e.g., an acquisition offer, or a bout of unbridled optimism by Mr Market) that raises the SP to 70¢ soon, I'll shout whoohoo, and take the capital gain.

Clime valued BYL at 55¢ on 25/02/2014, with the caveat that reads, “For those investors with a slightly higher risk appetite and an ability to withstand some volatility, BYL may be worthy of consideration for a small position within a diversified portfolio.” I imagine that if the author, Adrian Ezquerro, of that report were to rewrite it today, there would be less caution, even if the valuation remained at 55¢. See http://www.clime.com.au/latest-news/brierty-poised-perform-long-term/

I have not seen a 2014 Bell Potter analysis of BYL, but I understand there is one that values BYL at 54 3¢ – the figure mooted by one analyst according to http://markets.ft.com/research/Markets/Tearsheets/Forecasts?s=BYL:ASX.

BYL regularly secures small short-term contracts – loosely speaking about two contracts a month worth some $150 million a year in total. If these continue to dribble in on top of the 10-year Zuccoli Stage 2 Project contract (about $10 million a year) and this four-and-a-half-year RIO contract of about $66 million a year, BYL's SP should drift up into the 50¢ – 55¢ range, I think. When? Perhaps by the time the results for 1H ended 31/12/2014 are announced in early 2016.

If you look at http://www.lands.nt.gov.au/land-release/palmerston?SQ_DESIGN_NAME=print, there are a Zuccoli stages 3 and 4 to follow, plus the 480-lot Mitchell development. BYL should get some of this in future. There is a fair amount of road construction planned in the Pilbara, Kimberly and Gascoyne Regions to allow established iron ore miners to exploit brownfield sites, and highway upgrades by Main Roads. This is a competitive business, but because BYL is small, securing very little of that work would significantly improve BYL's business.

On the matter of Shine, on Monday, December 09, 2013 Gindalbie Metals announced that it had sold its Shine Hematite Deposit for $15m to Mount Gibson Iron. Gindalbie was part owner of Karara Mines Limited (KML), and BYL had the contract to mine the hemetite DSO for KML. With luck, BYL could be asked to handle Shine.