The negative cash flow also concerned me before I invested in....

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lukelee

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23/05/17

22:35

Post #: 24870387
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Originally posted by madamswer ↑

QIN is a completely different case. QIN has about $90 million cash and its debt is not due until 2023.

@Ausbert,

I've seen many of these sorts of situations.

The problem with QIN is that it is a company that reports lots of accounting profits (cumulatively, almost $400m over the past 5 years), but that generates zero operating cash flows (and significantly negative free cash flows).

(In that way, it reminds me a lot of Babcock and Brown, the investment bank which also financially engineered significant profits, but whose cash flow statement told a totally different story.)

Let's look at QIN's capital position going forward:

The company had $90m in cash @ 30 December 2016.

Excluding dividends, the company consumes between $60m and $80m of cash per annum (in DH2016, alone, it chewed up $55m).

Which means that, by December this year (i.e., a little more than 6 months time), it will - for all intents and purposes - be down to its last $10m or $20m.

In the context of the business's imminent funding requirements, the thing which you point to to for reassurance - namely the refinancing of debt that is only due in 2023 - is totally immaterial.

It's the short-term position of capital adequacy (or lack thereof) that the company's creditors are sure to be squirming about.

I can't how you can possible envisage a positive outcome out of any of this.

(Please don't shoot the lowly messenger.)

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The negative cash flow also concerned me before I invested in.

But Qin needs to plant as many trees as possible to maximize the return 15 years later. If Qin didn't take debt, it would be wasting time to wait for 15 years for a small amount of wood.

The reason why I invested is because I believe Indian sandalwood and land value will grow faster than the coupon rate.

QIN Price at posting: 29.5¢ Sentiment: Buy Disclosure: Held
2 Upvote

0 Great analysis

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The negative cash flow also concerned me before I invested in....

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