Feedback, page-52

"....sooner or later the market will realise it is not such a risky stock and "re-rate" it to a level at least more in line with its realisable NTA, possibly higher."

@stockanalysisguru ,

For the share price to get to NTA and beyond will require more than just ongoing monetisation of the asset base, I'm afraid; it will require a substantial recovery in earnings - certainly more than a doubling in EBITDA, at least - from current levels, to get there.

On the subject of "selling off the NTA", which is what has effectively been happening over the past 2 years, I think we are very close to the end of the asset sale process. On my projections, in 6 months' time selling off equipment will not only be unnecessary in liberating capital, but it will probably be undesirable from an operational competitiveness standpoint. (If, definitionally, you want to be in the crane business, then you probably should not sell off all your cranes.)


Do you mean for stockholders that participated in all the equity raisings, they would be down 55% in comparison to those that did not, who would be down the larger percentage (98%)?

Yes, kind of. But I think I may have misrepresented my position.

To be clear, my position on equity raisings is quite simply:

One percent of the time they may be justifiable, but ninety nine percent of the time they are contemptible occurrences and I loathe them.


"With these sort of stocks, that have had several equity raisings, I feel like I am able to ride off the capital put into the business from prior shareholders (although companies that raise capital frequently are usually weak businesses in my experience)."

Your parenthesised point is spot on.

Companies whose management either feel the need to issue equity frequently are either poor businesses, or their managers don't have any respect respect for the sanctity of equity capital. Usually, I find its a combination of the two.

Which is why I will never own this company for the long-term because, when the good times return, and if the current crop of mangers are still running the show, as sure as night follows day, they will become intoxicated by the cult of "corporate growth", and in pursuit of that growth they will be buying all sorts of equally bad and deeply cyclical businesses at the top of the cycle, and calling upon the equity market for capital to fund them.

(And the equity market- as is its wont - will be happy to provide the funding because the only group of people who become more inebriated by economic bubbles than company boards, are equity investors themselves.)

And I will never be able to be convinced that "next time will be different'." I have seen this movie too many times to know otherwise.

(In a way, one of the very reasons that I am a shareholder in this business today is because its strategic direction is being set, de facto, by the company's lenders, and not by its board. Once the damage that was done over the past decade has been repaired (and the company's share price reflects that), I strongly expect I will depart the share register.


"For example, the 30c raising you mentioned that raised $87m, increased the book value of bol by $87m. But now, the market is saying the whole company is worth $38m."

Yes, but that's where you are making, with respect, a cardinal error. The NTA - in $ terms, sure it goes up by $87m - but on a per share basis, which is on what you, as a part-owner of the business should be very focused, the value of the business went down by almost 40%!

Here's the maths:

NTA before capital raising = $153m;
Shares on Issue Before Raising = 185m
=> NTA per share = 81c

NTA after capital raising = $153m +$87m = $237m
Shares on Issue after raising = 475m
=> NTA per share = 50c

So before the raising, you - as apart owner of the business - had an asset that was "valued" (to the extent the NTA is a proxy for value), at 81c and after the raising it was valued at 50c.

That's 38% dilution.

Similarly for your share of whatever profits the company profits makes from that point on: you effectively get only 62% of whatever you would have received had no raising occurred.

How much does that suck?

And the fact that the company is today trading at a mere 10c ($38m market cap, you say, but don't forget the $40m of net debt, so really the value of the entire enterprise is closer to $80m) is by no means an outworking of the capital that has been raised in the past.

Irrespective of how much capital a company raises, if that capital gets pee'd against the wall, and is impaired, then whatever the share price is at any point in time is quite incidental to the quantum of capital raised historically.

What you are completely overlooking by saying "....on that one occasion alone, the company's value went up by the $87m of cash it raised, and yet today the entire company is worth less than that", is the notion that some, or all, of the value of that $87m was destroyed. And the fact is, it has been. And not just because I say so; the $177m of cumulative asset impairments (*) taken to book by the company and its auditors over the past five years say so, too.

[(*) "impairments" = execu-speak for permanent destruction of the value of capital]


Ultimately, the intrinsic value of a businesses is a function of its profitability and organic free cash flow generation, and not of how much money has been thrown at that business over is history. (How much money gets thrown at a business is more a reflection of how dumb equity markets are for continually providing companies with funding, irrespective of the merit or logic of doing so.)


"I feel that those equity raisings helped to lower the risk profile of the company, and I can now buy a piece of it at a level that is much lower than the amount put in to de-risk it. Recently I purchased cdd and ang (which I consider similar to bol in terms of risk profile and value, however I was slightly more confident in bol and put a tiny bit more into it) and they both soon after have launched capital raises (run by private equity). In the turnaround scenarios if you can get in at the last capital raising, or even better, after the last capital raising, but at a cheaper price, it can work out well."

Sure, those are probable examples of the 1% of occasions where capital raisings might be justified. Although I still say that self-respecting boards should have prevented the need to raise of equity in order to pay down debt from arising in the first place [*].

That's why the art/science/practice of risk management, for which they company's executive are paid, exists.

And, given a choice between a company in which you are an investor, going down the path-of-least resistance by simply coming to the market (again!) in order to become financially de-risked, or doing the hard yards of actually trading its way out of financial trouble, I know which one I prefer.

Problem is, for most boards - being as incompetent and lazy as they are - the former path is what invariably happens. And with it, the attendant transfer of value from existing shareholders to new incoming ones.

That the BOL board has not gone down the capital raising path is something for which they should be credited, I feel, because I'm sure that's one of the very first agenda items that the bankers would have put before them at each meeting over the past two years.


[*] Coming to shareholders for capital to repay banks what is owing to them, is an act that I consider holds shareholders in contempt;

It basically sends the narrative of:

"Yes, sir Mr Banker. I understand you now want you money back.
Trouble is, I don't have it quite now, but what I will do is I will go to the infinite pool of capital that is the Mugs of the Equity Market, and I'll raise it for you there.
Easy as."

And the result is dilution of shareholder value and new equity capital that has to be serviced to perpetuity.

The subliminal message is: Debt Providers are sacrosanct; Equity Providers are just muppets.

In its defence, for some years the BOL board has not displayed this insulting attitude to the owners of the business, at whose pleasure it serves.