baby and bathwater, page-59

I think the DSA purchase is a good one, just unforunate that they lost largest customer some 4 months after purchase. I feel confident that they will replace that lost business quickly and profitability of DSA restored. At a 3.5 times multiple they can afford a brief earnings holiday.

I dont have a number for their 2012 capex. Though given their comments at AGM I would expect a $10-15m estimate. I suspect that they will at this level self fund this year. Although this may not be the case next year if demand continues and fleet utilisation increases. This is always the case with a high growth business in capital intensive industry. I personally did not mind the equity raisings on a rising share price, but not at these levels. I like the conservatively geared balance sheet, which I feel is reflective of the management / board. I suspect that in 2-3 years we will see the benefit of the past 2-3 years of growth. It is at this time that your ROE metrics will look much better. So I view the lower ROE as a price for growth at this stage of the Company's development. Ironically the ROE metric will improve as the growth slows, so too the cashflows. That is when the preditors will come, just imagine a Stokes / Coates type of approach. Stokes would love all their power plants to be Cat, and would see this as a synergy. Coates are already a competitor but only for off the shelf pumps, I'm sure they would like to be able to move u the value curve and provide greater services. Perhaps that is when we see a $1 plus offer.

Re equipment life you need to make a visit to their office / workshops. The gear they use are huge diesel power plants driving huge pumps. Both these engines and pumps have very long working lives and are able to be refurbed at a fraction of replacement cost. RQL do a great job of maintaining their gear (which does come at a cost), but this not only extends the life of equipment but also the reliability and customer satisfaction levels.