DMCI Holdings, Inc. and subsidiaries (DMC) reported a consolidated net income of 3.1 Billion Pesos for the first half of 2020 (1H 2020). Although it reported a net income of 3.1 Billion Pesos it did not generate cash from operations. Worse is that its capital expenditures for the period required 3.2 Billion Pesos.
The cash burn for 1H 2020 of DMC was around 6.9 Billion Pesos reducing its cash balance to just 14.7 Billion Pesos at the end of 1H 2020. The 14.7 Billion Pesos cash balance looks massive but if you look at the debts due in the next 12 months of 16.3 Billion Pesos it would be worrisome. It is worrisome because there is no significant cash coming from operations.
Its biggest hope is its biggest unit Semirara Mining and Power Corporation (SCC) which has the biggest potential to generate cash from operations but its situation also looks bleak. SCC has a cash balance as of end of 1H 2020 of 3.8 Billion Pesos but the debts due in the next 12-month period is at 8.2 Billion Pesos. Even if SCC will be able to generate 2 to 3 Billion Pesos of cash from its operations and will not be required to spend capital expenditures in the second half of 2020, the cash generated might not be enough to pay debts coming due in the short-term.
This is definitely the period where the strength of a company’s management and its bankers count. DMC has to refinance its debt.
DMC is currently registering a dividend yield of 12.12%. Don’t bet on it for the next year.
Disclaimer: This is an independent analysis for discussion purposes with the aim of giving stock traders and investors an independent perspective. Accuretti Systems Inc. holds DMCI Holdings, Inc. shares.