13-Apr-19: From the Forager Australian Shares Fund (FASF, ASX: FOR) report for the month of March 2019:
"Crane operator Boom Logistics (BOL) reported stable revenue for the latest half year. But under the surface the company is making progress. An industrial dispute in November cost Boom $3m as some staff in NSW were given pay rises of 50%.
Without this disruption, profit before interest and tax would have doubled. That would have put Boom on a path to earn reasonable returns on the fleet of cranes the company owns, something it hasn’t done for five years. The business still trades at approximately half the value of its net assets."
I have been following BOL for a while, waiting for the tide to turn in their favour. FASF (FOR) hold BOL in their fund. Richard Hemming's "Under The Radar" (UTR) report has also spruiked them on occasion and had them as a "Spec Buy" in their February issue - in which they said:
"WHY WE LIKE IT: Boom successfully negotiated its way out of the strike
action last November at its NSW operations. This is no small achievement,
although some ambitious management targets have been delayed.
The stock was aggessively sold off and we believe that any positive
news will be reflected quickly in the share price. It must be remembered
that an impressive turnaround was occuring at BOL up to the point of the
strike action."
Boom provide crane hire services mostly, and are heavily exposed to increased spending in infrastructure construction, as well as mining construction. There are three substantial iron ore projects (South Flank, Koodaideri & Eliwana) beginning construction this calendar year in WA's Pilbara region, and plenty of infrastructure spending going on, especially across the eastern states, with more planned.
BOL has very little analyst or broker coverage, and are pretty typical of the sort of turnaround stories that interest Forager and UTR. They need to return to profitability, and to reduce their debt. They still had an ND/E ratio of 25% at last report (down from 30% 6 months earlier). They certainly have their risks.
They closed yesterday at 15.5c, only 2c above their 12-month low of 13.5c, and they could represent value here. Paradice Investment Management own 6.5% of the shares on issue, and BOL's board members are all shareholders except for the Frenchman, Jean-Pierre Buijtels, a non-executive director. Their Greek MD & CEO, Tony Spassopoulos, owns over 11 million BOL shares, so he certainly has a personal interests in getting them back on track (apart from his direct employment contract).
Karl Siegling's Cadence Capital also owned 5.3% of BOL for most of 2018, but sold down in late December and early January at between 16c and 17c to below 5% so they are no longer substantial holders. Karl's investment methodology dictates that he can only buy more when the share price is increasing and must sell down in tranches (or out) when the price falls. He has lamented more than once in his monthly reports about how he has been shaken out of positions by market volatility - or by temporary share price plunges. He paid over 20c per share for his BOL shares back in January 2018, so didn't make any money on them by selling them at below 17c twelve month's later. His LIC, Cadence Capital (ASX: CDM) used to trade at a substantial NTA premium, but now trades at a discount to their NTA. He often has the right ideas but then buys high and sells low because of his investing method and his own rules. A couple of years of poor returns, probably due primarily to increased market volatility, has hurt his results, his reputation, and his LIC's share price.
Boom hit rock-bottom back in 2016 when they almost went broke and their share price got as low as 6.3c. Only the very brave were buying BOL shares then I would suggest. They then staged a remarkable comeback to close 2017 at over 25c per share. The NSW workers' strike back in November (referred to by both Forager and UTR above) knocked about 25% of their market cap, with the SP coming back from over 20c to around the 15c mark. That mess is now done and dusted and they've moved on. I think they've now got some tailwinds instead of headwinds, but they need to continue to improve profitability and reduce their debt even further.
Disclosure: I have no direct exposure to this company yet, but they are on my radar (and watchlist).
Further Reading:
http://www.boomlogistics.com.au/our-operations/overview
http://www.boomlogistics.com.au/boom-logistics-awarded-major-wind-farm-project
http://www.boomlogistics.com.au/wp-content/uploads/2019/01/ASX-Release-Windfarm-update-04_02_19.pdf
http://www.boomlogistics.com.au/wp-content/uploads/2018/01/4.-FY18-Full-Year-Investor-Presentation-FINAL.pdf
http://www.boomlogistics.com.au/investors-media/presentations
http://www.boomlogistics.com.au/investors-media/asx-announcements/2019-announcements
