How Much Money Does TROC DE L’ILE SA (EPA:MLTRO) Have Left?

As the €2.92M market cap TROC DE L’ILE SA (ENXTPA:MLTRO) released another year of negative earnings, investors may be on edge waiting for breakeven. A crucial question to bear in mind when you’re an investor of an unprofitable business, is whether the company will have to raise more capital in the near future. This is because new equity from additional capital raising can thin out the value of current shareholders’ stake in the company. Given that TROC DE L’ILE is spending more money than it earns, it will need to fund its expenses via external sources of capital. TROC DE L’ILE may need to come to market again, but the question is, when? Below, I’ve analysed the most recent financial data to help answer this question. View our latest analysis for TROC DE L’ILE

What is cash burn?

Cash burn is when a loss-making company spends its equity to fund its expenses before making money from its day-to-day business. Currently, TROC DE L’ILE has €1.26M in cash holdings and producing negative cash flows from its day-to-day activities of -€1.30M. The cash burn rate refers to the rate at which the company uses up its supply of cash over time. The most significant threat facing investor is the company going out of business when it runs out of money and cannot raise any more capital. TROC DE L’ILE operates in the home furnishing retail industry, which delivered positive earnings in the past year. This means, on average, its industry peers operating are profitable. TROC DE L’ILE runs the risk of running down its cash supply too fast, or falling behind its profitable peers by investing too little.

ENXTPA:MLTRO Income Statement Apr 7th 18
ENXTPA:MLTRO Income Statement Apr 7th 18

When will TROC DE L’ILE need to raise more cash?

TROC DE L’ILE has to pay its employees and other necessities such as rent and admin costs in order to keep its business running. These costs are called operational expenses, which is sometimes shortened to opex. In this calculation I’ve only included recurring sales, general and admin (SG&A) expenses, and R&D expenses occured within they year. In TROC DE L’ILE’s case, its opex fell by 5.41% last year, which may signal the company moving towards a more sustainable level of expenses. However, this cost-reduction initiative is still not enough. Given the level of cash left in the bank, if TROC DE L’ILE maintained its opex level of €12.41M, it will still run out of cash within the next couples of months. Although this is a relatively simplistic calculation, and TROC DE L’ILE may continue to reduce its costs further or open a new line of credit instead of issuing new equity shares, the analysis still helps us understand how sustainable the TROC DE L’ILE’s operation is, and when things may have to change.

Next Steps:

The risks involved in investing in loss-making TROC DE L’ILE means you should think twice before diving into the stock. However, this should not prevent you from further researching it as an investment potential. The outcome of my analysis suggests that even if the company maintains this negative rate of opex growth, it will run out of cash within the year. The potential equity raising resulting from this means you could potentially get a better deal on the share price when the company raises capital next. I admit this is a fairly basic analysis for MLTRO’s financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research TROC DE L’ILE to get a more holistic view of the company by looking at:
  1. Historical Performance: What has MLTRO’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.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on TROC DE L’ILE’s board and the CEO’s back ground.
  3. Other High-Performing Stocks: If you believe you should cushion your portfolio with something less risky, scroll through our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 September 2013. This may not be consistent with full year annual report figures. Operating expenses include only SG&A and one-year R&D.