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This comes as Myriad released its annual results to end-May on Wednesday, where it said its operating profit rose 38.55% to R30.6m, and turnover gained 74% to R227m.
The group, which is a supplier of medical devices and single-use products to hospitals, plans to continue its acquisition strategy in the 2009 financial year locally and internationally.
But one asset manager said that he would "tend to be a bit cautious" when investing in small-cap AltX-listed companies with aggressive acquisition strategies.
Analysts agreed, with one saying, "When some of these companies don't grow organically, but grow acquisitively, there could be a danger".
History on the AltX has shown that not all companies survive when they bolt on smaller companies to grow rapidly, he said, giving Afribrand, Beige and Macmed as examples of aggressively acquisitive companies that have failed.
However, analysts said Myriad offers a lot of growth potential, and that it might be "unfair" to compare it to the likes of Macmed.
"Myriad is a tiny company that has been put together by sowing or gluing on other little businesses - but when combined with those businesses it's still small. It needs to quadruple its business to create more value for investors,? said a Johannesburg-based analyst.
He said that companies like Myriad want to acquire a critical mass, and it has to do it quickly to get to a size where it can compete against other companies such as Adcock Ingram. "But it might be difficult to bed down these little businesses and that's the danger," he said.
Despite the challenges, many other AltX-listed companies with the same strategy have been a success, according to a Cape Town-based analyst.
?But when these firms are on a price-earnings multiple of five, they still need to convince the investor as there other established stocks offering more value right now," he said.
When some companies list, especially in a bull market, they hope for a high rating and proceed to issue shares for acquisitions.
Companies like Myriad wouldn't want to list more shares due to market volatility, so they are going to need cash. But buying businesses with cash can also be a concern for analysts as this can crimp the cash position of a company.
For the period, Myriad's cash flow from operating activities fell 82% from R10.597m to R1.936m. Cash and cash equivalents also fell 82% to R1.644m.
However, Myriad management said that it utilised its cash generated during the year to settle the payment of one of its acquisitions - medical filters agency Filterworks - to fund inventories and to pay provisional tax.
"Myriad currently has minimal on-balance sheet debt," said Myriad CEO Jack Shapiro.
It plans to use a component of debt to fund further acquisitions. "There is a lot of growth in SA," chief financial officer Mark Neilsen says. "There's an increase in spending by government in the industry, and we are taking advantage of that as government is focusing on the high-end products that we offer."
-Fin24.com
