Ann: Half Year Results Presentation , page-3

Onyx

I agree it wasn't a great outlook but that's not the point. If the company's prospects were rosy then it would be earning a decent ROE and the share price would be close to NTA of $0.52.

The real story is the cash flow generation and pay down of debt. I must admit at just over $13m even this was a bit disappointing though due to poor working capital (receivables barely decreased despite a 23% reduction in sales).

The upside is the second half though. BOL should have about $14m in D&A this half and with CAPEX of less than $4m and asset sales of $7m planned should be able to generate $17m in free cash flow even if they make no profit and there is no working capital release.

Even with a small profit and some working capital release we could easily see a $25m plus reduction in net debt by the end of 2014 FY. The company will then start to consider a buy-back again (still on the cards although not ready yet) which should ratchet up NTA considering the discount it currently trades at.

The reason to stay invested is to watch the free cash flow churn down the debt and wait until the cycle turns and the company will earn a decent return. The company has stated assets are still underutilised and they are making permanent improvements to overheads. In the meantime NTA is still increasing as long as they making any profits and will increase rapidly if they implement a buy-back while trading at such a discount.

It won't happen overnight but this is a long term play that should trade closer to NTA when the cycle turns again. Whether that is 1 or 5 years away remains to be seen but it is a patient play.