Well, I'm disappointed in these figures, but am prepared to continue to hold, although somewhat tentatively. I'm hoping for an "Investor Presentation" but these have not always been forthcoming from this company.
Some observations: REVENUE increase of 6.7% to $44.5M is the biggest disappointment in my opinion. It probably means that like for like store sales have barely moved.
GROSS MARGIN is down 3.2% (due to rent increases and increased franchise payments).
The NET PROFIT decrease of 48% to $2.5M, on the surface is disturbing, but can be explained/clarified by reference to items such as increased marketing and sales costs, and impairment charges on intangible assets.
CASH AT BANK at $13.7M (June 30, 2019) is acceptable in light of expansion programme, but really depends on the quality of such spending. However, I am pleased that they are using the cash available, as Chinese companies traditionally like to hold large amounts of cash, unlike the Western World who believe you have to spend money to make money.
The importance of the 100 STORES in 14 Provinces can only be assessed in the light of FUTURE revenues and expenses.
Foreign currency exchange revenue was down $1.45M.
Earnings per share declined an alarming $1.45 to 79C.
Cash Receipts from customers declined by an unexplained $22M.
Item 11 is my biggest concern, and needs further clarification by the Board. The relates to CONTRACT ASSETS, which are shown at $8.9M in Current Assets, and $23.1M in Non-Current Assets. In the report, "CONTRACT ASSETS" are defined as "expenses relating to Zhang Lao San Health Experience Stores in China"........which I assume have yet to be reclaimed. Such a significant figure requires further explanation as to the real/likely value of this item.
Hope this helps others, maybe stimulates further comment, but please DYO Research.
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