No worries! All the best!

@luckygor yeah. Happy invest is right. Was talking about Free cash flow, which is negative due to large capex. But yes operating cash flow has been positive and has been growing, which is great!

Again, not saying ptrans is a bad business (or a good business). And not saying negative FCF is bad, especially when a company is growing.

Just that paying dividend while having negative FCF is something to look out for. I would say it's a grey area. Your judgement for this company should be based on a lot of other things. Pls pls pls don't take my word for it. I'm not recommending any calls on this. Don't wanna be the wrong reason y'all to lose money.

@peace99 maybe you can dm me on instagram and we can start from scratch? Don't wanna flood this chat space anymore.

By the way, negative FCF isn't necessarily a bad thing since ptrans is expanding. But paying dividends while have negative FCF is not really good imo

Wah pretty damn long. Hope I didn't miss anything. Also, note that I am not a professional. I just enjoy fundamental investing. So if I get it wrong, sorry in advance!

@peace99 Good question. Answer is gonna be a bit long but bear with me. First, I think your capex (renting car and living expenses I assume) is a bit low and can be covered using the profit. If capex can be covered by profits then don't need to take loan already. Let's assume total capex is 36k.

First, let's break it down all to monthly

Profit = 3000
Interest expense = -2000 (pay back your friend)
-------------------
Actual profit = 1000
-------------------
Let's assume your car and living is your capex. Make them into monthly then it'll be 3000, so

Actual profit = 1000
Capex = -3000
-----------
Free cash flow (fcf) = -2000 per month
"dividend" = -1000 (belanja makan and ptrans share)
Total = -3000
-----------
Your loan = 24000

Correct so far?

So the question now is, is it sustainable? Can your loan cover your negative FCF and the dividend forever? Based on this scenario, you won't be able to. You can only cover the "dividend" for 8 months (24000/3000 = 8). So for the rest of the year, you'll need to take another loan to cover not only your negative FCF, but also the "dividend" if you still wanna pay. This will increase your interest expense because you need to pay for the old loan from your friend and another new loan, thus lowering your profit.

But if you don't pay the dividend, your loan can last for the entire year (24/2 = 12) and don't need to take more loan.

This example is a bit simplistic though, I admit.

But basically as a company, if you have negative FCF and continue paying dividends, you're actually using your loans to pay dividends and will "deplete" your loans faster. What can you do? Take on more debt, which isn't healthy. Up until the company has positive free cash flow, only then can the company use less debt and can pay dividends freely.

@tksw of course can. But technically, it's the same. If they are giving out dividend, they have less cash for expansion.

Put it in simple terms, lets say
Operating cash flow: RM 8
Cash from financing activities (money from loan): RM 10
Cash from investing activities (capex): - RM 12

Without dividend: 8 + 10 - 12 = RM 6
With dividend (assume RM 2) = 8 + 10 - 12 - 2 = RM 4

No matter whether you take the dividend from operations or from financing, at the end you're still getting the same result.

Can read this article for a better view: https://seekingalpha.com/article/4229608-why-dividend-investors-should-look-free-cash-flow.

"If free cash flow consistently fails to cover the dividend, it could be that the dividend is being funded by debt, which is almost always unsustainable over the long-term."

You wouldn't belanja your friend makan if you got so many bill to pay right? Somewhat same logic.

But of course, always do your own research and don't take my word for it hahahaha.

In my opinion, it's not a good sign that they paid dividend. They currently actually have negative free cash flow because they of their large capex due to expansion. They are paying you dividend with their loans and not their operating cash flow.

There's also a large chance that they will issue more shares in the future to raise capital for more expansion. It's a very high capex company. Shareholders will most likely get diluted.

Not saying that it's a bad business though. Looking at the business alone, it has a geographic moat. Both location of the terminals are very strategic.

If you want to learn more about fundamental investing, I started a new instagram page here https://www.instagram.com/investingfundamentally/. Just to share what I have learnt.

I did a pretty deep research on this stock. A lot of good points - healthy balance sheet, great ROE and ROA, virtually no debt, positive owner's earnings and free cash flow.

They operate on a recurring revenue model, so you can expect stable incoming revenue every year. However, organic growth is pretty slow. But no doubt, the mySalam deal will boost their revenue greatly for these five years. Hopefully they can get more clients and more deals.

Based on my valuations, I would say Rexit is fairly valued at the current price.

This is not a buy or sell call.

If you want to learn more about fundamental investing, follow me here: https://www.instagram.com/investingfundamentally/ . I just created this to share more about fundamental investing. Hope we can all learn from each other!