Broker TP, page-10

Pb

Glowing analysts' opinion are one thing – HC posters' opinions are another – but both may on their own be worth no more than a grain of salt. Glowing personal opinion too can be flawed, or marred by a black-swan event. However, when the three sources of opinions align, then certainty increases.

One could with kindness view the Samsung saga as a black-swan event, but a repeat saga of that nature would be incompetence in the light of that experience – be selective with whom one contracts, and be careful with the articulation of contracts, including the jurisdiction to which the parties may have to resort if things go awry. Experiences like that have a value, which is why I like using PER-based valuation methodology, because these "soft" assets and other nebulous things can be accommodated in the selected PER.

One nebulous factor could be a this-time-is-different belief. I suspect that the boom-bust characteristic of past mining booms is going to be different – the significant miners of bulk commodities are going to look years ahead, and pursue a path of maintaining tonnage via a continual series of steps. Spot prices of ore are not going change their plans in the short-term. Other commodities, like graphite and lithium would, I think, remain prone to booms and busts, and be the source of many investment disasters. NWH can choose to focus on the large miners with deep pockets, and secure contracts in win-win style deals that lead to the miner getting a good cost price and increased certainty of delivery, and the likes of NWH getting the opportunity to optimise the deployment of equipment and teams. This is why I think we NWH shareholders can look forward to a future of controlled growth beyond the three or four years immediately ahead that we know are going to be good.

It was a long time ago when I first suggested that we would see an SP of $2.30 in FY2019. I have not done the homework to moot what FY2020 might be, but I suspect it to circa $3.00. An EPS of 25c at a PER of 12 gives $3.00. A crude calculation using a share tally of 400m, a Revenue of $2.4 milliard (what a so-called “billion” used to be called before Americans popularised the word “billion” to be a thousand million, rather than the million million that it used to be when I went to school). An FY2020 Revenue of $2,400 million, an NPAT margin of 4%, and a share count of 400 million gives an EPS of 24c. A 4% NPAT margin is low, a forward-looking PER of 12 is low for late FY20, so there is leeway to accommodate a rule-of-thumb valuation of $3.00 in FY20.

Earlier this week I stumbled on a $2.09 DCF-based valuation for NWH. I did not check its mathematics, because I instinctively felt that using a few years of free cash flow may not be an apt way to value a company bounding back from a near-death experience, and heading into a bright future. Also, I had no feel for the veracity of the metrics suggested. Somebody with time to kill, and an inclination to use a DCF-valation methodology, can comment on the merits of the $2.09 valuation at https://simplywall.st/stocks/au/cap...trinsic-value-of-nrw-holdings-limited-asxnwh/.

Pb, I look forward to debating valuations when you are inclined to do so – probably when we have more facts to support revenue and margin calculations, and things like cash flow, CAPEX and DPS, perhaps.