Ann: Full Year Results - Investor Presentation, page-5

"If I go by P/E of 10 on the ebita it points to about 45c ps. Is that reasonable in the forward looking context fy19?""

No, I don't think that is at all reasonable for the simple reason that I think you are confusing P/E with EV/EBITDA.

The company is expecting EPS of 10cps for FY2019.

Applying a P/E of 10x to that figure, results in a share price of 20c.

That said, I think that using a P/E is a flawed basis for valuing a deeply cyclical business such as this, and one that has a significant legacy depreciation charge such that capex and depreciation become significantly mismatched at various stages of the company's business cycle.

For that reason, I think that using EV/EBITDA is a more reliable valuation methodology:

If you reverse engineer the company's 15% Revenue growth and 2cps EPS guidance for FY2019, you can back-solve for roughly what the remainder of the P&L for FY2019 will look like (FY208 figures in parentheses):

Revenue = $210m ($183m)
EBITDA = $32m ($21m)

Less: D&A = -$19m (-18.2m)
=> EBIT = $13.2m ($2.8m)

Less: Interest Expense = -$3.5m (-$4.0m)
=> Pre-Tax Profit = $9.6m (-$1.2m)

Less: Tax = Nil
NPAT = $9.6m

=>EPS = 2.0cps (based on 475m shares on issue)


Now, based on:

1. the $32m of implied EBITDA for FY2019,
2. an assumption of an additional $5m working capital to support the 15% growth in Revenue,
3. using the $15m capex guidance provided - which would result in Net Debt at the end of fY2019 of around $28m ($37m at end of FY2018),

.... equates to the stock currently trading on a prospective EV/EBITDA multiple of ~4 times. (Market Cap of $102m plus Net Debt of $28m, all divided by EBITDA of $32m).

I think this is a business of seriously limited pedigree and quality, as evidenced by its chequered financial track record [*].

As such, the most I think one should ever countenance paying for this business is 5.0x EV/EBITDA. Which works out to a share price somewhere around 27c or 28cps.

There is no way on earth that this business should ever command a 10x EV/EBITDA multiple!


[*] Although, to be fair to BOL management, it did a good job (in large part, at the behest of the company's bankers, no doubt) at avoiding the need to raise new equity capital when the company was under severe financial stress in the years (2014-2017) that followed the commodity boom. Net Debt-to-EBITDA has been consistently above 3 times since 2014 (it peaked at a whopping 4.9x during FY2015). It is currently a tolerable 1.9x and will end FY2019 at less than 1.0x, meaning that the worst is over for BOL, and that the company is finally free from the manacles of indebtedness. Which is why the chequebook has been pulled out of the drawer and the spending is starting again. Which, in turn, means that the time to sell the stock is probably nigh.