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
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