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15/09/15
07:43
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Originally posted by Deme
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I examined the free cash flow position of DLS on 17/12/14 (refer to post # 14478025).
In that post, I compared the two years (2013-2014) which showed that DLS had yet to generate FCF without issuing equity or borrowing cash. I also stated at that time that DLS were "on their way to generating FCF and creating real value."
Let's revisit this analysis using the consolidated statement of cash flows for FY2015 (and comparing with the previous year).
OPERATING CASH FLOW
2014: $226m
2015: $84m
Cumulative OCF over the past two years of $310m
INVESTING CASH FLOW
2014: $103m
2015: $108m
Cumulative ICF over the past two years of $211m
In other words, DLS have had a cumulative capital surplus over this period of $99m. Unlike the period 2013-2014, DLS has managed to generate FCF without issuing equity or borrowing cash.
SP as @ 17/12/14 (when I wrote my original post) = 71.5c
SP as @ 13/09/15 = 50c
Granted, if you break down the figures on a yearly basis:
2014: $123m capital surplus
2015: $24m capital deficit
This $24m capital deficit was funded by a decrease in cash from:
2014: $152m
2015: $128m + 3m (exchange rate changes) = $132m
DLS has approx $130m in cash, but with the current POO, the market is assuming that they will struggle to generate FCF in the ST and will have to reduce their cash reserves over the next 12 months or so.
In an industry that requires enormous cap ex to sustain itself, generating FCF is critical to determining value. In other words, it may be prudent to forget pure asset valuations in the current environment and look at FCF as a way of determining value.
I continue to watch with interest.
In the meantime, I am off to interview some rainbow trout for the next few weeks.
Am interested to know if anyone has crunched any numbers on forecasted future cash flows over the next 12-24 months based on various POO?
Cheers,
Deme
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The years you discuss DLS executed to acquisitions and invested a lot into growing infrastructure to sustain high production levels long term . You suggest its FCF and investment levels are indicative of future spend . DLS was in a strong growth phase ( my view the acquisitions weren't flash ) and their ability to adjust capex to cashflow is strong. They have made it very clear at the Results CC there expenses will occur within their cash flow levels