HT8 sold about $12.6M during last quarter, at end of June, they have about $10M stock on hand. Here is my view:
·No stock – no sales. We all understand this, right?
·To increase sales, you have to buy more, right? HT8s is building up sales at a remarkable pace, so it needs to increase stock holding.
·IT/Tech products are in a global shortage right now, so we should consider us lucky that we are able to get stock.
·HT8 guys are experts in their field, so we can be assured that these stock are hot selling items.
·Unlike some other companies, HT8sinventory holding is not excessive comparing to its monthly sales in my view.
·The recent webinars have told us that management has a very tight control on ageing stock and also stock ratio.
·The cash flow is negative, but using rather a simple calculation, if the company has not acquired the $3.8M stock, then the cash flow will be positive by $3.8-$2.7=$1.1M.
·These $10M stock will mostly be sold in this quarter and the flow is like this – stock – sales – cash in – profit –reinvest into stock (this is the business circle)
For those of you who are still unsure how to read cash flow vs. Profit/Loss statements, let me repost the following example and hope it can help. Let’s use an example – a company sells only cables for simplistic sake:
At beginning of the quarter, It bought 10 cables at $10 each and paid for $100 to the supplier.
It sells it for $14 each, so a profit of $4 each cable.
At the end of the quarter, it sold 5 cables, so it made $20 profit from total income of$70 (5 x $14)
So far, this company has made a profit, but now let’s look at its cash flow during the quarter:
Cash outgoing = $100
Cash inflow =$70
So the cash flow is -$30 – note this is negative.
So what it means:
1.Thecompany has made a profit.
2.Thecompany still has 5 cables left ($50 in inventory) for sale for next quarter.
3.Thecompany received less money during this quarter than it spent – hence negative cash flow, but it may become positive next quarter because if it sells all 5remaining cables, it has no more supplier to pay and will have a $70 pure cash inflow.
Fellow holders, please note that we are here for a return on our investment, but the truth is that the timing is not right now. There are still a few of shareholders don’t research and possibly don’t even read the company announcements at all. Simply following the market trend or some hot tips or even rumours will only generate losses for you. Like a few of us have already said many times, if you focus on the business fundamentals and have patience, then you are more than likely be rewarded. Personally, I have had some tough lessons I learnt over the years when I was just following wind directions. Good luck to those of you who follow the investment principles!
