02-06-2015, 12:25 AM
(02-06-2015, 12:20 AM)propertyinvestor Wrote: If the company didnt generate a single cashflow over the past years, how did they achieve a net book value of USD 1.31? Is there something wrong with this figure? Did they mark to market some quoted equity investments to achieve this unrealistic figure?
I said the Company did not generate any Free-Cash-Flow (FCF), but it certainly did generate positive operating cash flows (OCF)! OCF is insufficient though - a Company has to generate FCF in order to be able to sustain investments, pay out dividends and avoid undue reliance on banks.
Ezra has a simple "formula" - generate OCF, but spend a lot on capex and fixed assets (vessels in this case), while leaning heavily on the banks and capital markets for financing cash inflows. So you can definitely build up a Net Asset Value in this way - by continually leveraging using debt and relying heavily on banks, CB and financial engineering to get by. For now, the music is still playing.......
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/