I have been finding the cashflow statements by Stockopedia to be particularly interesting, lately.
I took at look at QPP. Its operating cashflow for y/e Dec 2013 was actually negative, at £-8.9m. What you see is that accounts receivables have ballooned. Revenues have skyrocketed, but so have receivables. It is a big red flag. I note that it has raised £200m in an equity fundraising. Although I haven’t quite figured it out, I suspect that at least some of that money is going into keeping the company liquid.
The problem is, as the company expands, it will need to keep raising money. Even if capital markets are willing to play along, Stockopedia puts QPP’s PE at less than 2. So any efforts to expand are likely to be value-destructive. Receivables at the end of December were £328m. At the interim stage, they had increased to £561m.
How long can the wheels stay on the wagon?
Avoid.
138p. ASX 3452.
Mark Carter's blog 