Chart Update, page-858

I've been looking at valuation and I'll agree that given the debt size (small) and the stage we are in the recovery, and the ability to estimates margins, I think a PE for the next 2 years is a good approach now (rather than EV/EBITDA, P/NTA or P/Rev etc).

For me the eps numbers likely for FY2019 and FY2020 might be 17c and 19c say assuming nothing too surprising happens. I'll allow margins to slide a little to be conservative, knowing that there are forces we have discussed that are likely to push in both directions. The interesting thing though is there is another +10c in cash for both years due to the tax expense not payable and the non-cash amortisation of intangibles (ex goodwill).

I think the market knows the company is better than the 2018H1 (7.5c) but it may take a while to realise (or be convinced) just what NRW is able to make of that extra cash (witness Goldings payback and also RCR costing $10m for maybe $100m in revenue). Also the current debt levels means I believe they will get debt support for modest acquisitions at say 8% for these investments that pay back in a year or two.

For that reason (and because the risks and opportunities feel balanced again for the business to me), I'm going to count the eps as an adjusted 0.26 and 0.30 for FY2019 and FY2020 and update my rough valuation to $3 and my Sentiment to a buy up to $2.70.

No surprise I guess that's in line with what you've said @Pioupiou. 

Of course a black swan could peck the stuffing out of this but I also wouldn't put it past the team to make another transformational acquisition.

Cheers
pb