ASX:BSM Income Statement Oct 5th 17
When will BSM need to raise more cash?
In BSM’s case, its opex fell by 14.25% last year, which may signal the company moving towards a more sustainable level of expenses. However, this cost-reduction initiative is still not enough. Given the level of cash left in the bank, if BSM maintained its opex level of $5.3M, it will still run out of cash within the next couples of months. Even though this is analysis is fairly basic, and BSM still can cut its overhead further, or raise debt capital instead of coming to equity markets, the outcome of this analysis still helps us understand how sustainable the BSM’s operation is, and when things may have to change.
What this means for you:
Are you a shareholder? You now have a better understanding of the risks you may face holding onto the stock, since we know the company could potentially run into some issues in the next couple of months. Keep in mind that opex is only one side of the coin. I recommend also looking at BSM’s revenues in order to forecast when the company will become breakeven and start producing profits for shareholders.
Are you a potential investor? This analysis isn’t meant to deter you from buying BSM, but rather, to help you understand the risks involved investing in loss-making companies. The cash burn analysis result indicates a cash constraint for BSM, due to its current level of cash reserves. The potential equity raising resulting from this means you could potentially get a better deal on the share price when the company raises capital next.
Good management manages cash well – have a peek at BSM’s CEO experience and the tenure of the board here. If you believe you should cushion your portfolio with something less risky, scroll through my list of highly profitable companies to add to your portfolio..
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.