Pinned valuation:
Valuation deleted
@Rick I think you've hit the nail on the head here. Management at $LYL are making a good capital allocation decision.
(Note in my ROEs I use the definition: NPAT/ [ 0.5 x (Opening Equity + Closing Equity) ] which I prefer because it estimates the average equity through the period when the returns were earned.)
To cut the dividend for one year, or longer, when your ROE track record is 29% (FY22), 43% (FY23) and 42% (FY24), and is foreast to be 33% (just taking opening equity, but recognising ROE will be lower, because YE equity will be higher given retained earnings) is a good capital allocation decision.
They have a good diversity of projects, across stages of completion, and commodity exposures, and increased exposure to the Americas via SAXUM, .... which as I've said before I like.
They also seem to have a good recent track record on AGM Guidance, for Revenue/NPAT as follows:
They consistently BEAT on NPAT
First of all, I note just how impressive the guidance track record is. Unless you've worked in capital projects, it is difficult to appreciate how challenging it must be to predict revenue and earnings out 8 months ahead. This is the first time I've looked at their guidance accuracy, and for the industry, I think its pretty impressive. No low-balling going on, but reasonably precise given the project-by-project risks involved. And because they have a portfolio of projects of different sizes and stages of maturity, year over year progression is not going to be smooth, even if we look through the commodity capex cycle. So if FY25 turns out to be a bit softer, nows the time to accumulate, given the historical track record.
Investment Decision
I am very comfortable seeing $LYL valued at anything from $12-$14, so as I am very much still accumulating my position in this firm and learning about it, I've added to my RL position today by 25%, taking me mow to 3.2% in RL. (I'd be happy with this one to go up to 6% cost basis over the course of FY25.)
I didn't get the low today, as I wanted to do some more work on this, but my purchase went through at $10.865. I'm not done buying $LYL, but happy to keep some powder dry.
@Bear77 - just checked for and read your post, before filing this one. I'm also mindful that others might bale out with the outlook for a reduced dividend, and if it falls further, I'll happily oblige. :-)
I'll add some on SM today for transparency. Note - I am not selling any of today's SM trades in RL, as I am holding some spare cash in RL (well, a lot actually, with the proceeds of today's TNE sale!)
Disc: Held in RL