baby and bathwater, page-15

I had another look at RQL today, I think people will do fairly well from current levels, but there are plenty of equally attractive opportunities in the market.

My concerns that

- they aren't self-funding their growth yet (taking into account investing cash-flows they still require further capital raisings/debt facilities to finance growth). Need to see half-yearly to confirm this remains the case.

- based on a normalised NPAT of ($16 mil PBT x 0.7) = $11.2 million, starting equity of $80 mil, ending equity of $95 mil, they are only generating a normalised ROE of around 12.8%. I could see this improving over time to perhaps 15-20% but only if they can becoming self-funding.

These are two key issues which exist in spite of what I would consider to be quite good management. So, given that I require a return of around 15% from mining service companies, I think RQL is worth around book value, or between 38-42 cents.