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13-08-2013, 10:35 PM
Just read through 1Q14 result:
1. Main question will be its drastic improvement in working capital management from around 67 CCC days in FY2013 to 39 CCC days in 1QFY2014. This improves cash flow so drastically that net cash is now 85% of market cap! But I reckon the improvement is due to a timing issue. Increase in A/P which amounts to HKD317mln is about 60% of COGS for the quarter. It's too high especially for an OEM manufacturer. Increase in A/R is around 20% of 1Q revenue which is alright. So I do believe working capital investment should normalise in the subsequent quarters simply because A/P is too high.
2. Seem like market is really discounting the one-off loss in FY2013. In that case, assuming no significant downside event, 2Q2014 should be a major catalyst since Valuetronics recognized a bulk of its termination loss in 2Q2013. I would expect marketing gimmick with "Net profit increase XX%!" during their next quarter reporting.
1. Main question will be its drastic improvement in working capital management from around 67 CCC days in FY2013 to 39 CCC days in 1QFY2014. This improves cash flow so drastically that net cash is now 85% of market cap! But I reckon the improvement is due to a timing issue. Increase in A/P which amounts to HKD317mln is about 60% of COGS for the quarter. It's too high especially for an OEM manufacturer. Increase in A/R is around 20% of 1Q revenue which is alright. So I do believe working capital investment should normalise in the subsequent quarters simply because A/P is too high.
2. Seem like market is really discounting the one-off loss in FY2013. In that case, assuming no significant downside event, 2Q2014 should be a major catalyst since Valuetronics recognized a bulk of its termination loss in 2Q2013. I would expect marketing gimmick with "Net profit increase XX%!" during their next quarter reporting.
"Criticism is the fertilizer of learning." - Sir John Templeton