That $6bn TenderBook..., page-233

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I did not notice your 37278333 post of 31/01/19 until a few minutes ago. I too think the NPAT margin I used is a bit high, and the Revenue for FY19 too low, and the Revenue uplift factor also too low. The share count should be marginally uplifted for FY19, and continually uplifted in line with the historical trajectory.

The high NPAT margin was to a degree high for FY19, because I expect that the heavy impairment of the fleet value in FY15 is still having a positive effect in FY19, and those sweet words, “the project will use existing teams and fleet” or words to that effect, in recent contract-winning Announcements tended to support the view that the NPAT margin for F19 should be high. I had forgotten that the November guidance ventured that the H1FY19 NPAT would be $45m, so keeping that in mind, my 7.5% NPAT/Margin may be conservative. We can revisit this when we have the HI report to mull over.

In the longer term, NWH is going to have to invest in the fleet, and apply a normal depreciation (as high as the ATO allows), so the NPAT margin could decline, other things being equal, but they are not equal. As NWH's capability increases, it should lead to a higher NPAT margin than in the past. From the perspective of a long-term share holder, it does not really matter what the expenses in FY19 and soon thereafter are, provided any above-normal expenses can conceptually warrant capitalisation – that is, where the benefits accrues to NWH later. The expense of completing the negotiations to contractually effect the RCR acquisition is an example of such an expense, but so is the expense of tendering for work, because the benefits come later.

As you wrote, we may as well wait for the H1FY19 report to be issued before we focus our mind guessing what the report will tell us. That is valid for me, because I shall neither a seller nor buyer be. Someone dithering whether to buy NWH shares now, or later, may be well advised to guess what the H1 reported results are going to be, an make dicisons early, rather than wait for confirmation, and more outlook information, if the SP is likely to be higher then as a result of the H1 results Announcements.