Problems

On the face of it, it seems as if NCK (the company) has some growth issues above and beyond covid-related disruptions.

1HFY22 included Plush revenue but revenue growth has deteriorated significantly as shown below:




One would think that the brand is taking a hit, but gross margins are stable...so far.

It seems inevitable that NPAT and dividends will take a big hit in the near term.

Secondly, we won't know the full extent of their debt covenants until the FY22 Annual Report is out.

If I assume revenue takes a -12% hit for whatever reason (covid, China/shipping logistics, lockdowns, whatever...), the company should not need to raise capital. HOWEVER, this depends on the debt covenant ratios NCK is required to maintain. Just my calculations/opinions.

Intuitively, diversifying into lower price point furniture should not help gross margins, but maybe NCK have an edge here.

All in all, NCK looks interesting albeit with further downside.

Full disclosure, I am looking to buy NCK shares but merely trying not to enter only to see a capital raising or a downgrade immediately thereafter.