Lizard
01-09-2009, 02:26 PM
Just looked at yet another gem of a FY report from Australian pearl producer and MIS scheme seller, Arafura Pearl. I strongly feel it deserves a dishonorable mention in case anyone absent-mindedly considers buying in...
On the surface, APB looks cheap - $3.1m profit on a $14m market cap. However, look closer and $11m of this is magically generated from an increase in the value of biological assets. I say "magically" because they have missed the critical "note 1" from these unaudited accounts - the note that should detail the assumptions used in valuing these assets.
Now, call me cynical, but with the value of pearls having been slashed, sales drying up, inventories building (including at APB - but they are claiming this is part of some new marketing strategy to launch their own sales/marketing effort!) and the entire pearl industry in crisis, I struggle to believe that their $44m valuation for pearl oysters and spat is justified... I would hazard a guess that the true market value is currently somewhere between one third that figure and completely worthless... In addition, while their "strategically" growing inventory is never going to be written off, it may need to be written down in order to turn it into cash. And that bank overdraft is sitting mighty close to the $6m limit.
Have to hope some more hapless punters subscribe to their MIS scheme then?
Even if APB can survive and generate positive cashflows, I suspect the gains already booked on biological assets have effectively brought-to-book profits from future sales for at least the next 5 years.
On the surface, APB looks cheap - $3.1m profit on a $14m market cap. However, look closer and $11m of this is magically generated from an increase in the value of biological assets. I say "magically" because they have missed the critical "note 1" from these unaudited accounts - the note that should detail the assumptions used in valuing these assets.
Now, call me cynical, but with the value of pearls having been slashed, sales drying up, inventories building (including at APB - but they are claiming this is part of some new marketing strategy to launch their own sales/marketing effort!) and the entire pearl industry in crisis, I struggle to believe that their $44m valuation for pearl oysters and spat is justified... I would hazard a guess that the true market value is currently somewhere between one third that figure and completely worthless... In addition, while their "strategically" growing inventory is never going to be written off, it may need to be written down in order to turn it into cash. And that bank overdraft is sitting mighty close to the $6m limit.
Have to hope some more hapless punters subscribe to their MIS scheme then?
Even if APB can survive and generate positive cashflows, I suspect the gains already booked on biological assets have effectively brought-to-book profits from future sales for at least the next 5 years.