Hello Gold what you say is correct and I agree in general although I think its important in this case to make some clear distinctions.
I've never seen RQL as purely a rental business. Of course it rents equipment although its real value (and competitive advantage over typical rental businesses) is that rather than simply renting standard equipment of the shelf it will often design and construct equipment to suit a clients particular situation. RQL is a specialist solutions driven business not one which simply supplies equipment.
The equipment RQL uses has been predicted to have a long life (between 11-13 years I read in a presentation although check that) so will not need to be replaced so regularly and capital expenditure this year will be around $16-17 million and for next year also and it will be interesting to see what returns this capital generates. This was higher than previously anticipated (by around 30%) due to the increased demand for their services. This has also been reflected in the early revenue figures for this year which were around 40% higher than at the same corresponding times for last year.
RQL typically secures long term site presences and I believe that around 75% of their revenue is generated from long term customers with ongoing needs so there shouldn't be an environment in which their equipment becomes redundant and is just sitting around. That is, as long as Australia has a mining industry.
Resource Equipment Ltd subsidiary Resource Equipment Rentals grew their business during the GFC when commodity prices plummeted which to me is a great indication of the quality of the company and also the service it provides.
Best Wishes to all.
RQL Price at posting:
60.5¢ Sentiment: Buy Disclosure: Held
