Updates, follow-ups and other stuff

Like a balance sheet that presents a snapshot in time of a company's financial position so too the posts on this blog represent a snapshot of my analysis and thoughts at a certain point in time. Thus I will endeavour to update and follow-up on previous posts as some of the issues and my views change.

CYN 2Q07 Cashflow improves but too early to get excited: Subsequent to my rantings about CYN's failure to address profitability the company released 2Q07 cashflow numbers. Cash in the period increased to $6.3m up from $3.7m in 1Q07 due almost entirely to a $3.3m injection from the capital raising announced last November. Also of note was the improvement in Operating cashflow from $-1.7m in 1Q07 to $-0.8m in 2Q07. At this cash burn rate the company could fund operations for the next 2 years. However looking at the table below there is no clear trend in the direction of cashflows and therefore too early to start calling an improvement in profitability.

Since the company is cashed up with $6.3m and have plans to expand operations into India it would come as no surprise to see them up their capex spend and push Operating cashflows back to the levels of 1Q07. It would be nice to hear the company comment on cost control in the upcoming half yearly report but I won't be holding my breath given the company's track record to date.

PWK 1H07 negative cashflow due to timing issues:
As reported last week PWK's 1H07 results showed them tracking along very well however there was some concern about their negative cashflow from operations number of $-0.7m. I spoke with the company yesterday and it appears a large receipt for approximately $3m was received in the first week of January excluding it from the numbers to Dec 31st 06. I don't believe the company is experiencing problems in collecting from customers however it will be something to monitor when the full year results are released in August.

S&P 4Q06 earnings update and FY07 outlook:
Here is the latest article from Zacks on the S&P500 4Q06 earnings season. With over 60% of companies having now reported the median earnings growth is tracking at 13.2% (Remember this is the median ie. the middle score not an average). What is more interesting is Zacks revisions ratio which represents the number of upward earnings revisions divided by the number of downward earnings revisons. A number less than one indicating more downward revisions and a number greater than 1 indicating more upward revisions. The ratio currently stands at 0.82 which means analysts are becoming more
bearish on the earnings outlook going forward. This is reflected in average earnings for FY07 which are expected to slow significantly to 8.3% for FY07 down from 14.6% for FY06 making the case for limited upside in the S&P 500 this year. The caveat as always being that Wall Street analysts quite often get it wrong.

BHP kicks off reporting season with a bumper profit:
Almost guarnateed you'll see a headline like this or something that carries the words "record profit" in one of the major papers tomorrow. BHP reported NPAT of US$6.2 billon up 41% on the previous period on the back of improved prices and volumes. I'm not going to go into too much detail but suffice to say the market was very happy with the result and the announced US$10 billion in buybacks. Buying back stock or returning profits to shareholders in the form of dividends is a prudent measure when a company finds itself in a position where it cannot achieve a reasonable return on investment in new projects. However since we are supposedly still in a resources boom you'd have to ask whether BHP couldn't find some more profitable ways to spend their money. Yes they have a significant portfolio of new projects in the pipeline some of which are suffering huge cost blowouts. Could it be that the buybacks are a cautious signal from BHP that they believe prices have peaked whilst costs remain at levels unattractive to new investment?