Thursday 22 August 2013

Asian Bamboo report Q2 2013

Chinese forest company - my worst investment

Last week Asian Bamboo came out with their half year report for 2013 and it can be found here. The market did not appreciate it much and the stock fell significantly. What is a bit sad is that this was the first quarter after they decided to implement the turnaround strategy meaning they have had less than three months to see an effect of the strategy. I doubt that the turnaround strategy will start working already the first year however one could be negative that it took them over two years to start to implement a turnaround strategy even though they saw the problem rising. Still... as a shareholder one must give them more than three months to accomplish their new targets.

Here are the points that the CEO found of importance:

  • Revenue decreased 67% to EUR 14.5 million (Q1-Q2 2012: EUR 44.3 million)
  • Gross profit including FVBA-changes* decreased 75% to EUR 1.6 million (Q1-Q2 2012: EUR 6.5million), equivalent to a gross profit margin including FVBA-changes of 11% (Q1-Q2 2012: 15%)
  • Net loss was EUR 2.2 million (Q1-Q2 2012: net profit EUR 2.5 million)
  • Operating cash flow before changes in working capital was EUR 4.5 million (Q1-Q2 2012: EUR 15.5 million)
  • Net cash from operating activities was negative EUR 4 million (Q1-Q2 2012: positive EUR 21.3 million)
  • Cash and cash equivalents were EUR 34.2 million (31 December 2012: EUR 38.6 million)
 The reasons for why the market was so negative was mainly due to that they lowered the projected revenue for the year from 50 million € (which was already low) to 30 million €. This was the main issue with the addition that the turnaround has not been successful yet.

Asian Bamboo contrarian report

What is and was good already in the Q1 report in the financial statement is that the costs of sales are decreasing much more than the revenue still they are running red figures. I do not like that they once again decreased the value of the bamboo plantation because I always get the feeling that they will use that to start showing black figures later on again and if it really should be decreased then why was it pushed up so much in the first place?
For the first half year of 2013 Asian Bamboo is now -2.2 million €. I do not expect them to show any profit this year.

Conclusion: They have still not managed to turnaround the company. I will give them 1 to 1,5 year for doing this. I see no reason to buy more stocks since they have not managed to turn things around but I will definitely hold what I have.

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