I agree with that. I was actually very excited to come across...

I agree with that. I was actually very excited to come across RQL, given that they will clearly have a cracker FY11 result and earnings will likely grow strongly. However, when I "normalised" the businesses equity (I've worked back from pre-listing accounts in FY06 and ignored the accounting adjustments for acquisitions to get a good read of what capital (debt and equity) has been employed in the business over its life. For FY11 I have equity of $73 million and NPAT of $8.26 million (it is forecast to be $11.8 million, but only because of tax losses, so I have normalised NPAT). This gives a ROE of 11%. I have the ROE picking up in FY12 to 15% and in FY13 to 16%. Therefore, I have valued the business using a long run ROE of 15%. Assuming I was a return of 12%pa to compensate for the risk, and assuming all earnings are paid out as dividend, I'd pay 1.25 (15/12) time equity. With normalised equity of $73.4 in FY11, that gives me a value of $0.37 - slightly higher if they retain earnings - about - up to about $0.45 if they retain all earnings.

Unfortunately it has taken me significant time and research to nut this out, so I thought it appropriate to post so others can benefit / discuss my results.