Sabine Thanks for that – I wondered where OC got that $45m,...

Sabine

Thanks for that – I wondered where OC got that $45m, because I had forgotten the detail of that guidance, other than that the Revenue was forecast to be $1.1 billion.

The problem one has with guesstimating forward NPAT/Revenue percentage is that for some years after the horror year of FY15 there will be better-than-normal NPAT/Revenue percentage, which is occasioned by the fact that expenses were exaggerated via huge impairments in FY15. The logic supporting the impairments is that if one is going to have an Annus Horribilis, one may as well have an Annus Horribilissimus. I am glad that on rereading this, I realised that “annus has a double n.

FY19 is going to be more profitable than a normalised FY19 should be, then one cannot use it to extrapolate future years until fully depreciated equipment is an insignificant part of the fleet used, and in respect to cash flows, until the tax-loss assets are fully credited to zero.

If, as per the November “guidance”, H1FY19 had Revenue $500m and earnings of $45m, then the earnings for FY19 may, as you suggested, transpire to be $45m x 11/5 = $99m, which is a NPAT/Revenue of 9%. This is possible (it was above 8% in FY2017), and it fits into my vague between-5%-and-10% postulation months ago. That would give an EPS of $99m/370.6m = 26.7c, although the share count will increase a little to accommodate the shares that Management gives itself.

Now I think that I know why some folk have forecast an SP of about $2.67. For now I'll stick to my $2.30, and I'll calibrate my next target when the SP has hit $2.30. It will not be too long before the SP recovers to $4 - it was above $4 is days of yore.