Boart Longyear (BLY) Recommendation

Submitted by Craig Strzelecki on 16 May, 2007 - 18:07

Boart Longyear (BLY) shares have an initiated coverage with an Outperform broker call and a $2.60 price target from sharemarket analyst Macquarie Research Equities. Boart Longyear (BLY) shares have performed strongly since their ASX debut, up 13% from their $1.85 April IPO price. The analysts have initiated coverage on BLY this morning, with the view that BLY shares still offer impressive upside, rating the company as an outperform with a price target of $2.60. This is almost 25% upside to the current price. MRE claim that BLY is the market leader in providing drilling services to the global resources market, and has a strong market outlook. Global market leader: Boart Longyear (BLY) is the market leader in providing drilling services to the global resources market, with an estimated market share of c17%, well ahead of its nearest competitor. It is a market leader in the supply of drilling products and a leading manufacturer or coring rigs. Boart is a leading player in the environmental and alternative energy markets. Strong market outlook: Approximately 70% of Boart Longyear’s revenue is derived from the resources market. Current commodity prices indicate a strong market outlook for drilling services and products, with growing production levels and increased exploration expenditure. Commodity prices are well above the cash cost of production. Integrated business model: Boart Longyear provides drilling services, as well as manufacturing and distributing drilling consumables and capital goods (rigs). Competitors of the services side of the business are customers of its products business. An integrated model provides Boart Longyear with 'on the ground' knowledge of the drilling services market and a competitive advantage on product innovation. Significant operational enhancements to come: A number of operational improvements have been initiated, with the full benefits to emerge over the next few years. Rationalisation of the manufacturing base has commenced, while a number of global sourcing initiatives are underway. Capacity expansions are being implemented to meet demand. Boart Longyear has a number of consolidation opportunities, with the drilling services market highly fragmented. Opportunities to grow the business through the cycle: While Boart is expected to display robust organic growth rates over the elongated current cycle, it also has a number of opportunities to grow its business over the next few years. A number of growth initiatives are underway, including geographical expansion and expansion into adjacent markets. The analysts rate Boart Longyear an outperform and have a 12-month price target of A$2.60 per share. Ultimately, Boart Longyear's revenues are driven by the amount of exploration expenditure, with resource companies in a strong financial position to fund programmes, while high commodity prices continue to provide an inventive to explore.

Boart Longyear Limited is listed on the Australian Stock Exchange (ASX) under stock code BLY. You can view their investor website here. BLY was listed on the ASX on 5 April, 2007. Boart Longyear is the world's leading integrated drilling services provider and products manufacturer for the minerals industry. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade BLY. Check your charts and good luck with your share trading!

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