"Diligence", so far in this case, has not profited me one bit, I'm afraid.
Your point on a potential recapitalisation exercise is an important one.
Over time I continuously analyse the prospect of of a capital raising as best as I am able, and have come to the conclusion that the chance of an equity raising is quite low, possibly even less than 10%, and is diminishing.
Here's why I think this:
The last time BOL was forced to raise capital was in DH2009 (58m, 1-for-1 entitlement offer) and, related to that, a follow-up raising was undertaken in JH2010 ($20m share purchase plan, $15k max participation).
The financial circumstances of the company immediately preceding that 2009/2010 equity issuance was strikingly different to what it is today:
For starters, while BOL's maket cap at the time was $48m, which is of a similar order of magnitude as it is today ($41m), the company @ 30 June 2009 was sitting on a whopping $235m of NIBD.
The current NIBD position is probably around $60m (was $71m @ 30 June 2015), and is on track to fall to a little over $45m by 30 June, 2016, i.e., in just over 6 months'time).
So NIDB-to-market cap is today approaching 1.0 times.
It was almost 5 times the last time they raised capital.
And relative to the P&L, the situation today also looks vastly healthier: in the period immediately prior to that last raising, NIBD -to-EBITDA was 5.0x.
By comparison, in the current half-year, annualised NIBD-to-EBITDA is running at around 2.9x, and in JH2016, it'll drop to around 2.0x
Similarly, back in JH2009, EBITDA-Interest Cover was 2.9x.
This year, it will be above 4x, and will exit the year at a run rate of around 5 times.
And the calls on capital were a lot higher in FY2009: the company was consuming between $35m pa and $40m pa on capex (over 10% of Revenue).
Today, with the fleet having been rationalised (basically halved in size), the annual capex spend is in the single million dollar figures, (in JH2015 capex amounted to just $1.3m, but I don't believe for a moment that is sustainable).
Capex-toSales is currently running at 3% to 4%.
Finally - and this is a very important consideration - the shape of the company's debt trend in 2009 is totally different to what it is today:
Leading up to 30 June 2009, the company's debt was not only much higher than it is today, but it was rising dramatically too:
BOL's NIBD PROFILE PRIOR TO LAST CAPITAL RAISING:
(All figures in $m)
So, having considered all of the above, I'm of the view that an equity raising will not be needed.
But of course, if I am wrong, then I strongly suspect that its form will take that of some sort of entitlement offer.
And I would participate as aggressively as I was able in the event of any entitlement offer occurring, given that any capital raising any time from now would go a long way to leaving the company debt-free, and the resulting elimination of financial risk would surely induce a re-rating of the stock.
In fact, a large part of me says that a capital raising would actually be a good outcome, providing I was able to participate in it.
In short, I am quite agnostic whether or not the company comes to market for capital, or not. But if it does (and I think the chances are slim for the reasons I've cited above) it could well prove to be a share price catalyst.
BOL Price at posting:
8.6¢ Sentiment: Buy Disclosure: Held
(20min delay)
