The value of WIP is accounted for when assessing cashflow though? WIP is only worth something when you convert it to cash, so if you assess the cash you're already by nature... assessing the value of the WIP. The only reason you'd worry about WIP is if you acquired a non-ongoing business. Or am I missing something with your argument?
ie theorectical numbers: I invest $100 million into a company. I acquire $100mil of WIP which converts to $10million per year cash. I don't need to consider the value of the WIP as I am aquiring an on-going business where the value of WIP is always topped up. For my $100mil investment I'm gaining $10mil additional income per year.
Maybe if the WIP I acquired could be sold on for more than my original investment then we'd consider a different investment approach and valuation method to Shine but as far as I see I don't think that would be worthwhile for SHJ.
SHJ Price at posting:
72.0¢ Sentiment: Buy Disclosure: Held
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