ASX:SMC Income Statement Oct 5th 17
When will SMC need to raise more cash?
In SMC’s case, its opex fell by 9.66% last year, which may signal the company moving towards a more sustainable level of expenses. If SMC kept its opex level at $0.4M, it may not need to raise capital for another couple of years. Although this is a relatively simplistic calculation, and SMC may continue to reduce its costs further or raise debt capital instead of coming to equity markets, the analysis still helps us understand how sustainable the SMC’s operation is, and when things may have to change.
What this means for you:
Are you a shareholder? Investors can breathe easy knowing that SMC probably won’t be coming to market any time soon. This cash burn analysis should give you some colour on SMC’s cash position, however, keep in mind there are other non-operational expenses which we have not incorporated. Opex is only one side of the coin. I recommend also looking at SMC’s revenues in order to forecast when the company will become breakeven and start producing profits for shareholders.
Are you a potential investor? The cash burn analysis outcome indicates that SMC may not need to raise further equity capital any time soon. So, if you’re waiting to participate in an upcoming equity raise, there’s no immediate cash-oriented catalyst for SMC to issue more shares. In other words, if you like the company, there’s no benefit to waiting around in order to invest. Make sure you consider all the company’s fundamentals and have a strong investment case before you dive in!
Good management manages cash well – take a look at who sits on SMC’s board and the CEO’s back ground and experience here. If risky loss-making stocks do not appeal to you, see 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.