Debt is a bit of a red-flag to me.
$251 mil on the balance sheet as at 30-June-2012
Some coverage ratios:
Debt is about 2.5-2.6 times EBITDA
EBITDA is around 6.6 times the interest payable on the debt
I am using EBITDA in this case to strip out the depreciation and amortisation (non-cash entries). If interested, you could use the Operating Cash Flow and take off maintenance capex (of course you need to calculate it) instead, which might be even more accurate.
Not the most comfortable IMO - in fact I would say downright risky if they take a big earnings hit. Check the debt covenants if you are still interested.
They seem to have a history of funding acquisitions from increasing debt & tapping shareholders for Funds. In 2004 they had a NPAT of 6.6 million. In 2012 it is 42.4 mil.
To get to this point shareholders equity (cap raisings + retained earnings) has risen from 61 mil to 366 mil. Around 6 times. Debt has gone from 3 mil in 2004 to 251 mil (and growing by the looks of it!) in 2012.
By my calculations, and I understand that NPAT and equity calculations (or accounting figures in general can be rubbery figures at the best of times) has risen by 36 million in 8 years. To achieve this, using the figures I came up with above there has been 550 million thrown back into the business. That's a return of only 6.5% to date!
At best I would say this is a business that has very little, if any organic growth, and requires acquisitions to fuel earnings. It is OK if they pay fair value (or are fortunate, less) but history shows that the majority of corporate transactions end with this desired result.
I'm not surprised that the market prices this as a growth stock (the market seems to like businesses who make "Exciting" acqusitions and tell tales of building corporate empires) but for me the merits of such a business model, when they actually exist, are far outweighed by the risks.