When you see a company release its full-year earnings report at 7:15pm on the last day of earnings season, it's almost never a good sign. Sunbridge Group Ltd (ASX: SBB) shareholders will be bemoaning this fact as the Chinese company's shares sank 23% on Monday morning to an all-time low of 5.3 cents per share.
Our Foolish team has looked into Sunbridge group in the past and raised a few questions, but in isolation of that, the reason for the fall in share price appears to be a combination of higher than expected renovation costs, lower than expected revenue growth and the lack of dividends paid out.
Results
The highlights of Sunbridge's full-year results were:
- Revenue up 6% on prior corresponding period (PCP) to $84.24 million
- Statutory net profit after tax (NPAT) of $8.4 million down 40% on the PCP due to extensive store renovation program
- Underlying/operational profit result still solid at $15.37 million up from $13.9 million in 2013
- Balance sheet strong, with cash on hand and equivalents of $29.3 million
- Increase in number of self-owned stores continues – now 71 out of over 420 outlets
Piles of Cash
One of the most intriguing parts of the Sunbridge business is its $30 million cash hoard, which it says is being preserved for a number of potential strategic acquisitions during 2015. With 471,738,000 shares outstanding, the cash holding is equivalent to 6.36 cents per share (if my basic maths is correct).
At the current price of 5.3 cents per share and combined with 1.7 cents per share of after-tax profit in the last year, Sunbridge looks like an absolute bargain!
Investor Concerns
Despite trading at a price to earnings ratio of just 3.1 and having more cash on hand than its market capitalisation, investors still sold off the company on Monday. My belief is that this is due to the uninspiring results and unease surrounding what acquisitions the group might aim to make.
