For 31December 2022, I estimate the book unit value of inventory at $16 ($511k/32k). There seems to be a strong seasonal pattern, with inventory run down on 31 December and built up again by 30 June. That’s a strong positive for cash generation and profits at the next interims, since the majority of the 100k pearls held as inventory @ $30/pearl at end-June will be sold at net realisable value @ $70/pearl (September auction price of $100 less $30).
Yes, you’re right that the new boat will impact free cash flow this year, probably not so much profits if the boat is depreciated over a long lifespan. I took the new boat as validation that management were expecting very high cashflow this year, giving them the opportunity to modernise the capital stock and invest in a new farm for future growth. No idea how much the new boat will cost, but I wouldn’t expect it to absorb most of the uplift in cashflow from operations.
ATP Price at posting:
6.0¢ Sentiment: Buy Disclosure: Held
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