Boom Logistics (BOL)

Since my last post on BOL (where I had a decent whinge), the company has reported yet another deteriorating set of full year figures and in my opinion a continued lack of genuine action at the board level. To get it out of the way, I recently sold my position - before the market really went into free-fall. Absolutely nothing to do with timing, just pure analysis. My point is the recent market issues didn't have an influence on my rationale. 

In no particular order, here are some of the key issues as I see it: 

• NTA is slipping, and quickly. BOL is an asset play, pure and simple. However the ideal asset play has at least a stable or growing book value. BOL dropped from 49c to 41c in one year alone. Is 41c the floor? Who knows. I can't see how the valuation will hold up if the return on the assets remain poor. 
• Revenue is disappearing quickly. Again, in one year alone, revenue has dropped from $273m to $207m. That's a huge drop.  
• CEO is still on a big salary (despite a 10% pay cut last year). $675,000 p.a. is to just too big considering the performance of the business.
• Bullish forecast. Management has not delivered earnings growth, yet now forecasts a decent turnaround in a tough environment. FY16 forecast EBITDA is $20m-$30m, which is higher than normalised FY15.   
• Another change in CFO. 
• Taken management a long time to admit the real reason for not conducting the buy-back is debt covenants. 

Obviously the business could turn around from here. To me, that's fine. I'm happy to jump back in when there is some evidence to support re-purchasing.  

Kristian 

Disclosure: no position in BOL 

Paperlinx (PPX and PXUPA)

You may have seen recent some media articles about some new shareholder agitation around the no-win capital structure at PPX/PXUPA. I have been commenting on this situation for some time now and as noted in my last post on the topic bought some PXUPA in May. 

As noted previously, the 'trimmed down' PPX is basically owned by PXUPA shareholders. The face value of the PXUPA is $285m v my balance sheet estimation of $210m. Therefore PPX are basically worthless at the moment. At the time of the last post, I couldn't see why PPX was performing better than PXUPA however that trend has corrected itself (at least for the time being) with PPX falling from 3.6c to 2.6c and PXUPA holding up okay rising from $9.50 to $10.46. 

The new main agitator, Blue Pacific Partners, has outlined what I think is a pretty reasonable plan and can be read in full here. 

The key proposal is to offer PXUPA shareholders 1,000 PXP shares for every PXUPA. This means PXUPA holders (assuming 100% converted) would collectively own 2.85bn PPX shares. There are 609m original PPX shares bringing the total share count to 3.459bn shares of which 82% would be owned by former PXUPA holders and 18% by the initial PPX shareholders. 

What I really like about the proposal is that it delivers a win-win for both PPX and PXUPA holders. Using Blue Pacific's conservative value of $125m (much less than the $210m I noted above), each share is worth 3.6c. So the PXUPA would be worth $36 each and PPX shareholders actually have a genuine value of 3.6c (and not just the pure lottery ticket value they currently have which will sooner or later expire like a decaying option).  

As a PXUPA holder, I have zero expectations of every receiving $100. However $36 is a decent hair cut and if it allows the situation to be sorted out I would accept it. 

But of course this is all just theory. Management actually have to themselves adopt such a plan, and based on the track record we can't hold our breath. However my reason for buying a few months ago was the Board stepping in and shedding everything non-ANZ. This has been done, so let's see now if they step up and sort out the capital structure. 

Kristian 

Disclosure: own PXUPA