Thanks
@juanamigo
I enjoy your insightful and objective analysis of the balance sheet for Bellamy.
Indeed, BAL will be another valuable case study for investors in Australia or countries relying on specific food product exports.
In my opinion, there is no right or wrong amount of specific information that Bellamy management should provide, given the unpredictable nature and availability of China market status and actual demand levels. In fact, the provision of financial guidance, such as profit forecast, $1M Net Cash, Using bank facility to fund working capital or having $110M inventory, was alarming but at lease shows investors and creditor where the problem lies and is quite solvable.
However, I am more worried about the off-balance sheet financing, such as potential shortfall payment to the manufacturers, the contract term/penalty with Bega and Fonterra, and operating liability to suppliers and warehouses. These items are usually hidden from the balance sheet and replaced with rather obscure statements and deceiving generalization. These hidden liability is not only real but will have a significant impact on Bellamy cashflow.
I am surprised to see during this critical time, the management does not even provide critical information on off-balance sheet financing and detailed cash-flow analysis, in the name of commercial secret.
Without a complete picture of its cash flow and liability, both on and off balance sheet, investors are next to impossible to value a firm.
In the case of Dick Smith, off-balance financing such as rebate contract and operating leases has caused great loss to even sophisticated banks and funds.
what's your view on its off-balance-sheet liabilities, given the nature of long lead time with suppliers and huge inventory with potentially more pre-order/production arrangement, already in place?
