(27-01-2011, 11:34 AM)mrmoon Wrote: Is there any view on this company? It has announced very strong results in the recent quarters.
If OCBC research (see attached) is right, this company is very undervalued at 24.5 cts.
You know what I hate about analyst reports? They almost never ever comment on the Balance Sheet strength and Cash Flow Statements! And these are far more important than the income statement. Basically I had to check these out for myself using SGXNet....
A quick glance shows worrying signs:-
1) 9M 2010 revenues were up 73.5%, but Trade Receivables nearly doubled while inventories nearly tripled! What could be the reason for this? Debtors paying slower and inventory piling up?
2) Noted cash had dropped by nearly HK$100 million.
3) The Company now has bank borrowings, as compared to 9 months ago. Bank borrowings now exceed cash balance, putting the company in a net debt, instead of net cash position. As a result, finance costs have also risen.
4) Operating cash flows were strongly negative for 9M 2010, to the tune of HK$62.8 million, while capex took up another HK$68 million, so effectively negative FCF was around HK$130 million. Hardly an amount to sniff about, especially when your cash balance is just HK$37 million.
5) Under Financing Cash Flows, what the heck is "Net Advancement from Invoice Financing"?? I've studied many years of accounting but never came across such a colourful term. Considring it's about HK$50 million INFLOW, shareholders should be very concerned indeed.
Now why weren't all the above flagged out by the analyst???