Posted by: donmihaihai | November 27, 2016

Strong Cash flow. What is that?

Take Boustead Singapore 1HFY2017 results

NPAT was SGD22M.

Cashflow from operating activities was SGD77M.

Cash increased from SGD259M to SGD297M

Use NPAT rather than profit attributable to equity holder of the company for good reason. What in concern is cash and cash has to be look at in this way.

Wow Boustead Singapore is generating load of cash, 55M more than NPAT, cash generating machine. you might say! True it is generating lot of cashflow but cashflow can’t be look into on a single year basis. Cashflow before changes in working capital basically just above PBT. That say there isn’t lot of one-time non cash item. So basically, the cashflow of the company is just about Net profit. The “pop” is due to changes in working capital which can be easily explain by saying timing differences.

From FY11 to FY16. Boustead Singapore generated SGD375M NPAT and SGD408M Cashflow. Sound just right. Depreciation would explain the reason for the higher cashflow. That SGD55M will be not continue for sure.

What about SGD297 cash? Well SGD134 sit in Boustead Project and the remaining SGD163 sit in companies other than those in Boustead Project. Most are wholly owned subsidiaries. That SGD134 can be say as restricted by Boustead Project and is not available for Boustead Singapore to use it as like ATM. The easiest way to think about it is ask shareholders of Boustead Project, “Are you going to let Boustead Singapore to use your cash?” Some shareholders might just say, “No way. They have no rights and what do I get”

So what is strong cashflow? Cashflow is strong when the company is generating good return. ie good ROE. Nothing more nothing less and of course I am assuming cashflow is almost the same or just above NPAT.

Free cashflow is another thing and for some industries, growth require heavy investment in working capital.

Talk about working capital. Recent times is pretty bad for many companies. More decent company will see increasing cashflow despite reducing revenues. This is just changes in working capital and is not a sign that company is doing well. Of course they are not doing badly as well. As the lousy companies will not see the “pop”.



  1. In 2017Q2, BP held S$134M cash and S$91M bank loans.
    So basically the remaining S$163M is net cash (no borrowings at BH side).

    Supposedly BH wants to draw money out of BP, what is the likely option?
    Declare BP dividend and over 50% will flow to BH.
    IMO, most BP shareholders (being more short term) wouldn’t mind.

    For years, BH has been looking for ways to “spend” the warchest but in vain so far (the past investments were not significant IMO).
    BP, on the other hand, so far have far more options to invest the warchest, with Mediapolis project, Lease portfolio & China Venture (still early).

    So the irony is that, BH should channel the money into BP and not the other way round. But of course being FF Wong, his takes I believe is for BP to stand on its own (you need money, go borrow and make sure the projects make economic sense).
    BH will still be left with the warchest problem.
    Which for FF Wong it seems like the perma option.

  2. Hi. Sound like you know more about the company or Wong FF than what can be gathered from public sources. Are you an insider? If not how do you know? Or if it is just your opinion..

    Happy CNY.

  3. Hi, no, not an insider, just a minority shareholder following the company for quite several years. Gathering info from the webcasts and AGM’s Q&A. Although at times FF Wong can be quite “long winded” with his explanation, but generally his views are frank and somehow not politically-correct kind.

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