anyway, let's look at it data from 2004 up to 2007. From the accounts (Balance sheet, P&L, CF), i have calculated some ratios. It shows that dreamgate is pretty aggressive in executing its business (in term of leveraging).
The rule of thumbs for Accrual ratio is it should be not exceed 10%.
the BS accrual ratio is a new ratio which i have just picked up from my friend @ http://calvinthebuffetts.blogspot.com/
on 2005, Sales/Cash collected ratio is very high and may signify that Dreamgate management has been using aggressive revenue recognition to push up their revenue growing rate. Luckily,
Sales/Cash collected ratio is somewhat lower nowadays.
| financial year ended | 2007 | 2006 | 2005 | 2004 |
| increase in receivables | 31,388 | 19,573 | 36,376 | |
| % increase in receivables | 30.44% | 23.43% | 77.15% | |
| %increase in turnover | 28.29% | 39.77% | 33.60% | |
| total assets | 402,625 | 283,965 | 246,096 | 158,507 |
| total cash | 42,937 | 21,575 | 17,509 | 25,735 |
| total liabilities | 226,615 | 145,266 | 133,581 | 71,595 |
| total debt | 141,463 | 68,963 | 61,283 | 26,013 |
| NOA (net operating asset) | 274,536 | 186,087 | 156,289 | 87,190 |
| average NOA for past 2 yrs | 230,312 | 171,188 | 121,740 | 43,595 |
| cash collected | 244,918 | 195,807 | 117,723 | |
| b/s accrual ratio | 38.40% | 17.41% | 56.76% | |
| sales cash collected ratio | 112.82% | 110.00% | 130.90% |
if we look at the % increase in receivables Vs increase in turnover, from 2006 to 2007 we see that it has increase in receivables but decrease turnover. This seems to spell another trouble in brewing.
as such, better avoid this stock at the moment.
disclaimer:
1) for simplicity stake, some of the info' (such as total debt) i take lumped value and this will introduce some inaccuracies, but it won't be too significantly affecting the validity of the ratios calculated.
2)2008 data will be quite bad, which i haven't got the time to include in this calculation.
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