Almost 3 years ago I entered a position in Boom Logistics with a simple thesis. The company, that specializes in renting out cranes, was at that point in time trading at A$0.135/share while it had A$0.51/share in tangible assets, mostly consisting of cranes and other big equipment. My bet was this equipment could easily be sold for a price closer to book value than the market was implying, giving downside protection even if the business would not turn around.
Now that we have moved forward a couple of years in time it’s easy to check if that was indeed true, and it appears that I was wrong. The business has so far not yet turned around, and while Boom Logistics managed to use equipment sales to manage their debt load net tangible assets per share dropped to A$0.33 in the mean time. In the first half of FY2017 the company for example transferred A$4.7 million in equipment to “assets held for sale” while recognizing an impairment loss of A$1.9 million, implying a discount of 42% to book value. If we take a bit of a short cut and apply the same discount to their whole fleet of cranes we get a NAV/share of A$0.16. Still a bit higher than the latest share price of A$0.12, but it’s a marginal difference (and in 2016 the discount was actually bigger). So I sold my position today, incurring a loss of 11.1% on my purchase price. Obviously not a great result, but you can’t be right all the time. Although in this case, I’m pretty sure that if I would have followed the company closer I would have recognized that my thesis was broken earlier. So that’s something I’m trying to improve on.
No position in Boom Logistics anymore