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Forum - Mining and Commodities Eh! (Morgan Stanley China - CAF)    All things commodities, with a Canadian Junior Miner focus.

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From: Jimjones1972 (Rep: 3) reply to Jimjones1972Date: 06/21/2018 17:31
Forum: Mining and Commodities Eh! - Msg #6177 - List CAF msgs Thread #674000957 (Rec: 0)
Newest article on CAF. Won't matter because in 6 business days or sooner we will see Q2 results. 40% revenue increase, stronger South African Rand/US Conversion, High coking coal prices, decreased expenses based on what was stated in Q1 MD&A, the combination should generate a much larger overall profit for the second quarter. I am estimating between $750-800K USD. Keep in mind that $473K CAD is $0.01c earnings, so after 6 months if we earn over $1 million USD, stock fair value is around $0.30 based on a 10X multiple.

https://simplywall.st/stocks/ca/materials/tsxv-caf/canaf-group-shares/news/how-financially-strong-is-canaf-group-inc-cvecaf/

Autumn Haas June 22, 2018

While small-cap stocks, such as Canaf Group Inc (CVE:CAF) with its market cap of CA$5.45m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. So, understanding the company’s financial health becomes vital, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. Here are few basic financial health checks you should consider before taking the plunge. However, since I only look at basic financial figures, I recommend you dig deeper yourself into CAF here.

Does CAF produce enough cash relative to debt?

CAF has shrunken its total debt levels in the last twelve months, from CA$702.23k to CA$416.88k , which is made up of current and long term debt. With this debt repayment, the current cash and short-term investment levels stands at CA$453.61k , ready to deploy into the business. Moreover, CAF has produced CA$587.51k in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 140.93%, meaning that CAF’s current level of operating cash is high enough to cover debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In CAF’s case, it is able to generate 1.41x cash from its debt capital.

Can CAF pay its short-term liabilities?

At the current liabilities level of CA$1.18m liabilities, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 1.93x. For Metals and Mining companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.



TSXV:CAF Historical Debt June 21st 18
TSXV:CAF Historical Debt June 21st 18
Does CAF face the risk of succumbing to its debt-load?
With debt at 16.11% of equity, CAF may be thought of as appropriately levered. This range is considered safe as CAF is not taking on too much debt obligation, which may be constraining for future growth. We can test if CAF’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For CAF, the ratio of 10.57x suggests that interest is comfortably covered, which means that debtors may be willing to loan the company more money, giving CAF ample headroom to grow its debt facilities.

Next Steps:
CAF has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. In addition to this, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how CAF has been performing in the past. You should continue to research Canaf Group to get a better picture of the stock by looking at:

Future Outlook: What are well-informed industry analysts predicting for CAF’s future growth? Take a look at our free research report of analyst consensus for CAF’s outlook.
Historical Performance: What has CAF’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.



Reply to Jimjones1972 - Msg #6135 - 04/03/2018 12:56

Canaf Group Inc Q1 2018 Financial Results + Management Highlights
(All Information Taken From SEDAR)

Price: $0.095
Common Shares: 47,426,195
Options/Warrants: Nil
Insider Holdings: 15,391,328 or 32.5% as per www.Sedi.ca
Website: www.canafgroup.com
Financials (All in US Dollars – Should Be Converted into CDN Dollars for accurate value)

ASSETS
Cash: $394,520
Trade Receivables: $2,678,248
Sales Tax Receivable: $17,942
Inventories: $895,361
Prepaid Expenses: $31,114
Property & Equipment: $1,172,010
Intangible: $1
Total Assets: $5,189,196 USD

LIABILITIES
Trade & Other Payables: $2,211,185
Income Tax Payable: $119,979
Current Portion Of Bank Loan: $310,819
Remaining Portion Of Bank Loan: $85,760
Total Liabilities: $2,727,743

Asset/Debt Ratio: 1.9:1

Q1 2018 Sales
Revenue: $3,273,213
Quarterly Net Income: 552,815 USD - $707,440 CAD

Q1-Q4 2017 Sales
Revenue: $10,699,117
Yearly Net Income: $439,664 USD - $562,640 CAD

*Note : Canaf Group is currently on track to have a record profit year, already exceeding net income from 2017. $475,000 CAD is equivalent to $0.01 cent earnings. Most profitable junior companies trade in a 8-12 multiple range, making Canaf group undervalued based on the last five quarters.

Management Discussion Highlights From Q1 2018

OVERALL PERFORMANCE AND OUTLOOK

The results above shows the sale recovery and demand of the Corporation’s product which started in Q3, 2016. Sales for the three month period ended January 31, 2018 increased by 45% in comparison to the previous quarter and is expected to increase by a further 40% in Q2, as more confidence returns to the markets. (Page 5)

The outlook and profitability of the Corporation remains strong and the Corporation expects to continue to generate positive free cash flow during the fiscal year-end 2018 and, as it accumulates cash and reduces its gearing and increases its efficiencies, will continue to look at investment in related business opportunities in South Africa, a country which many now regard with a very positive outlook

The three month period ended 31 January 2018 saw the Corporation continue to recover from significantly reduced sales between mid-2015 to mid-2016, when depressed global commodity prices affected the Corporation’s customers negatively.

Revenue for the three month period was $3,273,213 (2017 - $2,991,706) a $281,507, 9% increase, and the Corporation returned to profitability with net comprehensive income for three month period ended January 31, 2018 of $552,815 (2017 - $198,221) a $354,594, 179% favourable variance. The results reflect the previously reported turnaround from increased demand with sales remaining strong.

During the quarter, Southern Coal experienced a further increase in demand from its customers, in comparison to that of Q4, 2017 and the Corporation can confirm that Q2, 2018 will reflect a further increase to Southern Coal’s maximum capacity.

The Corporation also remains focused on completing a Broad-Based Black Economic Empowerment (“B-BBEE”) transaction for Southern Coal, by mid-June 2018. The B-BBEE is a form of economic empowerment initiated by the South African government with the goal to distribute wealth across as broad a spectrum of previously disadvantaged South African society as possible. A new partner has been identified and initial terms of the agreement, which will remain much the same as the previously agreed transaction, will most probably be announced by the end of April 2018. The Corporation remains confident that it will achieve its B-BBEE goals during the current fiscal year and we remain optimistic of the opportunities that will arise from such a transaction.

The Corporation reported net income o f $187,126 (2017 - $197,691) a $10,565 unfavourable variance of over the previous period. The reduction in GM and profit are due to increased feedstock costs in Q1 and a one month delay in the corresponding sale price increase, a general increase in maintenance cost and investment into B-BBEE training projects in Q1 which represent approximately 75% of the projected annual spend for B-BBEE

The Corporation has an agreement to lease premises for its coal processing plant in South Africa for a term of ten years, expiring on December 31, 2020. The agreement offers the Corporation, in lieu of rent, feedstock coal to be delivered to its adjacent premises, which it purchases at market price. Should the Corporation decide to purchase feedstock coal from an alternative supplier which the lessor is otherwise able to provide, then a monthly rent of Rand 200,000 ($16,819) is payable. To date, the Corporation has not been required to pay any rent for the premises as it has continued to purchase feedstock coal from the landlord.

The bank loan bears interest at 10.25% per annum, matures on January 7, 2019, and is secured by the Company’s furnace acquired with the proceeds from the loan. The bank loan is repayable in blended monthly payments of Rand 391,624 ($32,934 translated at January 31, 2018 exchange rate)). During the three month period ended January 31, 2018, the Company incurred interest expense totaling $Nil (January 31, 2017 – $15,322).
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