Catching up on the SM interview and reviewing the company I am documenting my take as an investment:

TLDR = On my watchlist, requires a lower price to be an attractive risk/reward for investment.

Low margin, capital intensive and cyclical with a long but chequered history, timing is going to be especially important for an investment in Boom Logistics unless we have seen the Lepard truly change it’s spots. Trading on modest PE’s despite solid performance over the last few years, it requires a large margin of safety due above mentioned factors, so it may offer value currently but is not a solid asymmetric bet at these prices. 

Ignore the PE of 3 as shown in CommSec, this is caused by tax adjustments in FY25. Also I wouldn’t rely on a PE based on H1 FY26 NPAT of $5.2m which is ~6.8 because there is no tax expense. It is currently operating at a PE of around 10 if you apply normal tax rates, providing a valid basis for comparables. There are significant tax losses (A$29m at the end of FY25) which are of value from a cash earning perspective, but I would factor this into EV which also considers net debt, rather than income based metrics.

In preparation for opportunities 20-30% below the current price, I am maintaining a watch.

Positives:

• Turn around that is showing continued improved results with a change in management.
• Focus on shareholder returns and value accretive business, share buybacks efficient.
• Cyclical in strong part of the cycle (Gold, copper, renewables, infrastructure).
• NPAT growing off a low base, nominal growth will be low but % will be high, valuation increase from rapid near-term earnings growth and valuation re-rate possible.
• RoNA focus of management supports profitability at the bottom line not pursuit of profitless top line growth. Additional borrowing capacity allows for further growth if identified without diluting shareholders.
• Fleet management (age & utilisation) has improved, so current capex program looks sustainable which supports ongoing profits.
• High debt, but almost all is asset financing for working assets with resale value support.
• FCF supported by tax losses offers high NPAT% returns and strong cash flows in the short to medium term.

Risks:

• Low margin, capital intensive and cyclical – things can go south quickly if market shifts.
• New CEO, will the business turn around instigated by the previous CEO continue?
• Strong competitor in Freo Group (owned by Berkshire Hathaway since 2011). Note current and former CEO came from Freo Group.
• Long legacy of poor performance may return if culture and the board let it.
• Management and control issues that allowed the previous CEO to misappropriate $1.1m (since recovered) may not be fully addressed.

Thesis if investing: Undervalued due to a poor history, but having proven a turnaround it is well placed to take advantage of the cycle, growing earnings via top line and margin growth. Negative market sentiment could change with continued good results and a significant re-rate occur on higher earnings offering multiple returns.

On watch list, will sharpen pencil below $1.50.