I'm in a similar position to Relaxan so readers should note I'm also talking my own book although I am intrigued at the eagerness of many on here to reconsider their holdings when it gets to around the 50-55c range. The CR more than a year ago was done at 49c and I along with many others was very disappointed I couldn't buy more at that price although luckily we've all had that chance again for the last 5 months or so.
RQL is unique because currently it (to my understanding) operates a monopoly through its main de-watering subsidiary. And this is an inelastic service. If commodity prices were to fall 30% next year BHP couldn't suddenly decide that they were going to pump out 30% less water... During the GFC when commodity prices were hammered the dewatering business grew its earnings. The macro threat to the dewatering business is mine closures and if this starts to happen, it almost wont matter which ASX company you're invested in, the price action wont be pretty.
RQL has such a great mix of qualitatives (barriers to entry, competitive advantage, excellent management, high recurring revenues, monopoly provider...) and quantitatives (decent ROE and likely to increase, low debt, good cash flow although currently recent negative free cash flow as it invested heavily in equipment, increasing revenues and profits, very high profit margins...) and the outlook for growth is very positive when you consider the geographical expansion still to take place across Australia and recently into Indonesia for both the de-watering business and DSA that to assign it a P/E of 8-10 is mistaken. A company with this mix should be selling for 14-16 times earnings.
Using Relaxan's figures which I'm comfortable with in FY 2013 RQL will be worth between $1.06 and $1.21, although as always, a margin of safety when buying is essential.
This is of course, only my own opinion and should not be construed as advice, I have been wrong on countless occasions in the past.
P.S MikeM, I reckon we'll see a maiden dividend included in the FY report.
RQL Price at posting:
44.0¢ Sentiment: Buy Disclosure: Held
