Performance

Shareholders,
Good read below. Looks like analysts are working on EOFY balancing. Have been highlighting similar needs/concerns in recent posts

Is Beston Global Food Company Limited (ASX:BFC) Growing Too Fast?

Michael Crabtree  May 12, 2018
As the AU$88.66M market cap Beston Global Food Company Limited (ASX:BFC) released another year of negative earnings, investors may be on edge waiting for breakeven. Savvy investors should always reassess the situation of loss-making companies frequently, and keep informed about whether or not these businesses are in a strong cash position. Additional cash raising may dilute the value of your shares, and since Beston Global Food is currently burning more cash than it is making, it’s likely the business will need funding for future growth. Today I’ve examined Beston Global Food’s financial data from its most recent earnings update, to roughly assess when the company may need to raise new capital.See our latest analysis for Beston Global Food
What is cash burn?

Beston Global Food’s expenses are currently higher than the money it makes from its day-to-day operations, which means it is funding its overhead with equity capital a.k.a. its cash. With a negative operating cash flow of -AU$24.72M, Beston Global Food is chipping away at its AU$5.20M cash reserves in order to run its business. The measure of how fast Beston Global Food goes through its cash reserves over time is called the cash burn rate. Companies with high cash burn rates can eventually turn into ashes, which makes it the biggest risk an investor in loss-making companies face. Beston Global Food operates in the packaged foods and meats industry, which on average generates a positive earnings per share, meaning the majority of its peers are profitable. Beston Global Food faces the trade-off between running the risk of depleting its cash reserves too fast, or risk falling behind its profitable competitors by investing too slowly.
ASX:BFC Income Statement May 12th 18
When will Beston Global Food need to raise more cash?

Opex, or operational expenses, are the necessary costs Beston Global Food must pay to keep the business running every day. For the purpose of this calculation I’ve only accounted for sales, general and admin (SG&A) expenses, and R&D expenses incurred within this year. Over the last twelve months, opex (excluding one-offs) increased by 25.00%, which is rather substantial. My cash burn analysis suggests that, if Beston Global Food continues to spend its cash reserves at this current high rate, it’ll have to raise capital within the next 3 months, which may be a surprise to some shareholders. Moreover, even if Beston Global Food kept its opex level at AU$25.63M, it will still have to come to market within the next year. Even though this is analysis is fairly basic, and Beston Global Food still can cut its overhead in the near future, or raise debt capital instead of coming to equity markets, the outcome of this analysis still helps us understand how sustainable the Beston Global Food’s operation is, and when things may have to change.
Next Steps:

This analysis isn’t meant to deter you from Beston Global Food, but rather, to help you better understand the risks involved investing in loss-making companies. Now you know that if the company was to continue to grow its opex at a double-digit rate, it will not be able to sustain its operations given the current level of cash reserves. This suggests an opportunity to enter into the stock, potentially at an attractive price, should Beston Global Food come to market to fund its growth. I admit this is a fairly basic analysis for BFC’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Beston Global Food to get a better picture of the company by looking at:

1. Historical Performance: What has BFC’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Beston Global Food’s board and the CEO’s back ground.
3. Other High-Performing Stocks: If you believe you should cushion your portfolio with something less risky, scroll through our free list of these great stocks here.