interim results are out, page-9

Hi Guys

I was pleased with the interim result and particularly the outlook commentry. Firstly, please note the the comment re 65% increased revenues relates to DSA only and referred to DSA expected to have revenues for the 5 months to June 65% above that for the first 7 months! Thus as DSA recorded $6.9m for the first 6 months, let's assume they did 1.1m in January for a total of $8m for the first 7 months. Thus they are saying DSA will do $13.2 m for final 5 months, or $21.2m for full year. That is a huge turnaround from the first 6 months and thus expect to see a robust second half profit contribution from DSA, which will more than justify the acquisition.

As for the traditional REL business, it seems to be going well, 38% sales growth ( with comment they could have done better were it not for decision lethargy!) and slightly ahead of budget for the first half and business buoyant going into H2. Comment re 2013 outlook "very promising". This all sounds great and shows that whilst the share price was broken the company was not. This is a rare phenomenon and was a buying opportunity for those with courage.

Other elements from result I liked were that the capex committed to during first half was only $4m ( not what was paid as this was higher from prior period orders), versus the depreciation charge for the half of $3m. They also advised that the fleet is still underutilised. This demonstrates that they have the ability to grow without significant capex. I have no doubt that as growth sees a higher fleet utilisation, then capex will increase ( to more than $4m per half) but feel that capex and depreciation are becoming more aligned, which is very positive for cashflows.

I also liked the fact that they were silent on guidance which to me means they are still comfortable with the $23m EBITDA and $16m NPBT FY12 guidance given in August 2011. In fact, in August 2011, they also guided to a 40/60 H1/H2 split. On this basis, and having recorded an EBITDA of $10.7m for H1 we could expect $16m EBITDA for H2 giving $26.7M for full FY12 - or $3.7m above guidance. This, with continued REL growth and DSA back on song must set RQL up for a $33-35m EBITDA for FY13.

Even at today's price the EV is $130m and thus the 2012 EV:EBITDA is only 5 times, reducing to 3.8 times for 2013. That is not expensive for a stock with this growth profile ( even given the highly capital intensive nature of the business).

IMO courage of conviction will be well rewarded on this one.

All the best

Relaxan