Ann: Full Year Results - Investor Presentation, page-50

"What I like about this name is that at current levels, stock can appreciate 40% before even getting to NTA."

Forget about NTA; to justify trading at NTA, BOL would need to generate Returns on Capital of around 10%.

Based on the $220m asset base of the business, that would require NPAT of around $22m.

The only time BOL produced that level of profitability was in 2007, but that was when the company's asset base was almost three times larger, at $600m.

And the last time BOL generated double-digit ROC was in 2005.


"EBITDA to cash conversion should be extremely high given better terms with customers and tax shield that this businesss will have over coming years."

I'm not sure where you come to think that BOL will ever be in any position to demand better terms with customers. BOL's customers are all major corporations who don't allow themselves to be dictated to in terms of paying their bills, especially not by small suppliers providing commoditised services.

IF BOL's sales reps told the likes of BHP, Cimic or various government entities that fund infrastructure projects, that BOL would henceforth only make its cranes available on BOL's payment terms, BOL would very soon find its fleet standing idle in some yard somewhere.

So brace yourself for a bit of disappointment on this front, too. The working capital requirements of this business are significant relative to the levels of operating profits.

As case in point, working capital to sales for BOL averages around 13%, and during cycle upswings that figure can reach the mid-teens. For context, Working Cap-to-Revenue ended FY2017 at just 10.5%. Assuming demand for BOL's services rebound, one can assume near-term Working Cap-to-Sales reaching 14% or 15%.

That equates to the requirement for an additional $6m to $7m investment in working capital. That's a significant figure in the context of EBITDA currently running at, somewhere around $18mpa.

So, unfortunately, it is not a given that as the cycle recovers, BOL's EBITDA cash conversion will be that flash.