I think it's not exactly the same as Cash burn but the effect is the same.
NNW is expanding faster than its rate of collecting cash back.
For example, they have collected all A/R, say 100m from last month, plus the cash on hand, say 20m, the total is 120. If this month there is a larger requirements than the 120m due to the accelerated loyalty point GTV, then they will be out of working capital. Several ways out:
1. short-term debt from bank, which is unlikely and costly
2. speed up the speed they collect receivable, which is difficult in China
3. slow the expansion, which is difficult to decelerate once they have already reached this speed.
4. capital raise from Australia, current board will be reluctant because of the potential and current low pricing
5. IPO in US, good for us and good for the board
6. Cornerstone investor from China, which is likely
NNW Price at posting:
17.0¢ Sentiment: Hold Disclosure: Held
