Cash flow and some

hasi17 · 1 Cash flow and some Fri Dec 09, 2011 10:37 pm

hasi17

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Hi, I was going through the quarter reports of some companies to see if there is anything good. Not very promising. I have a few questions.

Cash flow
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DIMO
Why is there a huge negative cashflow? 1.4 billion. Because the last few years everything has drastically changed it's hard to see what went different. Can anybody explain the huge negative cash flow?

(NEST also has some negative cash flow probably because of capital expenditure. Usually NEST is talked about with strong cash flow. But not at the moment.)

There were some other companies like,
DIST - negative 1.5 billion (5 billion burrowings) I thought this was a cash rich company

Is it normal for finance houses to have a negative cash flow? There were some I checked.

Other
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DOCK
About a year ago long term investor who has JKH shares was in top 20 list. But now he's not there.

hariesha · 2 Re: Cash flow and some Fri Dec 09, 2011 10:57 pm

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DIMO

(Increase) /decrease in inventory (1,819,581)
Income tax paid (1,272,445)
Acquisition and construction of property, plant & equipment and leasehold property (216,767)

hasi17 · 3 Re: Cash flow and some Fri Dec 09, 2011 11:08 pm

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hariesha wrote:DIMO

(Increase) /decrease in inventory (1,819,581)
Income tax paid (1,272,445)
Acquisition and construction of property, plant & equipment and leasehold property (216,767)

Yes I saw the income tax and the inventory, but shouldn't the profits also increase to compensate for that. Shouldn't the inventory be moving? Vehicles come, get sold and brings money, at the same time new vehicle keep on coming, get sold and brings money. It looks like it's stagnated.

hariesha · 4 Re: Cash flow and some Fri Dec 09, 2011 11:09 pm

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DIST is in the process of acquiring a stake of JKH since mid-2011. Even last week foreign selling of JKH also believed to be acquired by DIST. By Sep 30th 2011 they have spent 4b for JKH shares alone and during the quarter they have acquired some foreign holding of LMF also. It is estimated DIST to have acquired almost 5% of JKH by now.

hariesha · 5 Re: Cash flow and some Fri Dec 09, 2011 11:14 pm

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hasi17 wrote:

hariesha wrote:DIMO

(Increase) /decrease in inventory (1,819,581)
Income tax paid (1,272,445)
Acquisition and construction of property, plant & equipment and leasehold property (216,767)

Yes I saw the income tax and the inventory, but shouldn't the profits also increase to compensate for that. Shouldn't the inventory be moving? Vehicles come, get sold and brings money, at the same time new vehicle keep on coming, get sold and brings money. It looks like it's stagnated.

All motor companies seem to have increased their Inventories expecting some tax hike in the budget. But in DIMO case they have handled probably the largest single fleet order from Def. Min. (To police Dept.) under Indian line of credit which is running into the current quarter as well.

hasi17 · 6 Re: Cash flow and some Fri Dec 09, 2011 11:33 pm

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hariesha wrote:DIST is in the process of acquiring a stake of JKH since mid-2011. Even last week foreign selling of JKH also believed to be acquired by DIST. By Sep 30th 2011 they have spent 4b for JKH shares alone and during the quarter they have acquired some foreign holding of LMF also. It is estimated DIST to have acquired almost 5% of JKH by now.

What does everybody think of this?
For me it is like two rich but lazy farmers each having huge uncultivated lands and money. And each farmer instead of growing crops and prospering, buys a stake of the other farmers land expecting the other farmer will grow crops and bring profits. Both are conglomerates owning other companies. JKH gives only a small 2.70 dividend per year say 1% and JKH is not a fairly valued stock either. And negative cash flow means they have to burrow and pay interest. For me it seems like these big companies have no clear vision or objective for the efficient use of funds.

Heh one broker report today talks about DIST "having a cash rich position" but they have a big negative cash flow.

insidertrader · 7 Re: Cash flow and some Sat Dec 10, 2011 9:07 am

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Value investing says good companies should be rich in cash less in debt.

DOCK investor famous for long term investing just got in less than a year ago I guess. So he's left already.

hasi17 · 8 Re: Cash flow and some Sat Dec 10, 2011 11:38 am

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Some more things I came across.

RICH which real revenue growth was only 20% this quarter, has their profits upped hugely by the one-time sell off. Because of this RICH PE ratio looks deceptively low. Even despite that their cash flow is negative 1.5 billion. Short term borrowings 4 billion.

smallville · 9 Re: Cash flow and some Sun Dec 11, 2011 8:19 am

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companies can actually record negative cash flow for several periods and still be profitable..

I found the following explanation on BusinessDictionary.com;
Negative cash flow does not necessarily means loss, and may be due only to a mismatch of expenditure and income. Chronic mismatch, however, may indicate ineffective credit management, leakage of funds through fraud, or actual loss. Temporary mismatch is covered usually by arranging an overdraft facility.

Would these be few cases?
1) Paying out debts or vestered interest in other company stakes
2) Paying out a fairly high dividend
3) Rise of expenditures
4) ineffecient credit management

In RICH's case I think its an OD (short term borrowings of 4B) to cover this.