We're Interested To See How Asia Energy Logistics Group (HKG:351) Uses Its Cash Hoard To Grow

There's no doubt that money can be made by owning shares of unprofitable businesses. For example, Asia Energy Logistics Group (HKG:351) shareholders have done very well over the last year, with the share price soaring by 148%. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

Given its strong share price performance, we think it's worthwhile for Asia Energy Logistics Group shareholders to consider whether its cash burn is concerning. In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

How Long Is Asia Energy Logistics Group's Cash Runway?

A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. As at June 2025, Asia Energy Logistics Group had cash of HK$84m and no debt. Importantly, its cash burn was HK$4.0m over the trailing twelve months. So it had a very long cash runway of many years from June 2025. Even though this is but one measure of the company's cash burn, the thought of such a long cash runway warms our bellies in a comforting way. The image below shows how its cash balance has been changing over the last few years.

View our latest analysis for Asia Energy Logistics Group

Is Asia Energy Logistics Group's Revenue Growing?

Given that Asia Energy Logistics Group actually had positive free cash flow last year, before burning cash this year, we'll focus on its operating revenue to get a measure of the business trajectory. Unfortunately, the last year has been a disappointment, with operating revenue dropping 14% during the period. Of course, we've only taken a quick look at the stock's growth metrics, here. You can take a look at how Asia Energy Logistics Group has developed its business over time by checking this visualization of its revenue and earnings history.

How Easily Can Asia Energy Logistics Group Raise Cash?

Given its problematic fall in revenue, Asia Energy Logistics Group shareholders should consider how the company could fund its growth, if it turns out it needs more cash. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.

Since it has a market capitalisation of HK$618m, Asia Energy Logistics Group's HK$4.0m in cash burn equates to about 0.6% of its market value. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.

So, Should We Worry About Asia Energy Logistics Group's Cash Burn?

As you can probably tell by now, we're not too worried about Asia Energy Logistics Group's cash burn. For example, we think its cash runway suggests that the company is on a good path. While its falling revenue wasn't great, the other factors mentioned in this article more than make up for weakness on that measure. After taking into account the various metrics mentioned in this report, we're pretty comfortable with how the company is spending its cash, as it seems on track to meet its needs over the medium term. Separately, we looked at different risks affecting the company and spotted 2 warning signs for Asia Energy Logistics Group (of which 1 doesn't sit too well with us!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies with significant insider holdings, and this list of stocks growth stocks (according to analyst forecasts)

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.