I would caution against extrapolating the company's recent...

I would caution against extrapolating the company's recent performance given they only recently finished their largest ever project. So, there is a risk of capitalising peak cycle earnings.

Undoubtedly, the stock appears cheap with LTM EBIT of $15.1m, it trades at an EV/EBIT multiple of 4.8x. The question is what is the mid-cycle normalised earnings that should be capitalised to determine a reasonable valuation for the business. With the recent acquisitions and greater scale of projects, the overhead base of the business has grown from just $31.6m in FY22 to $77.9m in the the LTM. If the additional overheads are fixed in nature, the operational leverage of the business could result in a steep drop in earnings off only a small drop in revenues. This is eminently possible with Project Caymus now finalised.

I have a hunch the overheads are somewhat variable and can be flexed. However, whilst I like business, being the market leader in the construction and maintenance of liquid storage tanks with a growing suite of adjacent capabilities in piping, civil engineering and automation design, I will probably sit on the sidelines for the next while.