Huntley had a buy at below $2.75 dated 26/9/07 however this is...

Huntley had a buy at below $2.75 dated 26/9/07 however this is under review.
price keeps going down ... but analysts have been recommending the stock.
Here is Huntley's recommendation. He had a buy on it under $2.75 26/9/07 but they have since put the stock under review.
Here is what he says.

The market will need convincing


BOL reported a result in line with guidance with NPAT increasing 10.4% to $36.6m and EPS 1% higher at 21.5c. Shares on issue increased 12% to $170.5m. Revenue increased 38% to $349m, EBITDA 28% to $96.4m and EBIT 19% to $65.5m. DPS rose 6% to 11c fully franked.


We retain our Accumulate trigger price at $3.00. We expect investors will need several improved results to restore confidence after the disappointing FY07 result. We re-iterate that BOL has many characteristics we like: leadership position, focus on long-term contracts, and exposure to what should be long-lasting resource and infrastructure strength. The capital intensity of the business is a negative as are worldwide equipment shortages which may constrain growth in FY08. The resignation of the CEO earlier this year is another point of concern.


FY06($m)
FY07($m)
% Change


Sales Revenue
252.5
349.3
38.3%

EBITDA
75.1
96.4
28.3%

Depreciation
20.3
30.9

EBIT
54.8
65.5
19.4%

Net Interest Expense
7.9
13.2

Pretax Profit
46.9
52.3
11.4%

Tax Expense
13.8
15.6

Group NPAT
33.1
36.6
10.4%




The components of the profit downgrades issued earlier in the year were quantified as follows:


* Impact of soft Victorian construction market on Tower Division: (1.7m)

* Impact of extreme weather: (3.7m)

* Customer maintenance delays: (1.7m)

* Equipment delays: (0.5m)


We do not consider the nature of any of these items abnormal. For them all to coincide probably is, but for the purposes of adjusting NPAT to estimate a more “normal” year we add back only half of the total of these items. This implies EPS growth closer to 9% - reasonable but not particularly impressive. James’ Equipment EBITDA margins fell from 28% to 24% as a result of a new crane range discount. Had these margins remained stable EPS growth would have been closer to 12.8%.


Net operating cash flow was strong at $72.1m, a little above the $67.5m of its accrual accounting equivalent, NPAT plus depreciation and amortisation. Gearing via net debt/equity at year end was 79%. EBIT covered net interest five times. Investment in plant and equipment was $22m while $78m was spent on acquisitions, net of cash acquired. The corresponding figures in FY06 were $50m and $87m.


The outlook is strong for all BOL’s key sectors – industrials, resources and engineering construction. BOL should benefit from both the resource and infrastructure booms for many years.


Employee expenses increased by around 23%, roughly in line with the revenue increase after removing the impact of sales of the James Equipment business. James was not yet owned by BOL in FY06, and distorts comparisons given its lower ratio of staff to revenue. This implies wage inflation was not material in FY07. This could change in the future as the demand for labour continues to outstrip supply.