How Long Will Loss-Making iClick Interactive Asia Group Limited (NASDAQ:ICLK) Survive?

iClick Interactive Asia Group Limited (NASDAQ:ICLK) continues its loss-making streak, announcing negative earnings for its latest financial year ending. 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. Additional cash raising may dilute the value of your shares, and since iClick Interactive Asia Group is currently burning more cash than it is making, it’s likely the business will need funding for future growth. Today I’ve examined iClick Interactive Asia Group’s financial data from its most recent earnings update, to roughly assess when the company may need to raise new capital. Check out our latest analysis for iClick Interactive Asia Group

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, iClick Interactive Asia Group has US$24.10M in cash holdings and producing negative cash flows from its day-to-day activities of -US$9.49M. 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. Furthermore, it is not uncommon to find loss-makers in an industry such as tech. The industry is highly competitive, with companies racing to invest in innovation at the risk of burning through its cash too fast.

NasdaqGM:ICLK Income Statement Mar 28th 18
NasdaqGM:ICLK Income Statement Mar 28th 18

When will iClick Interactive Asia Group need to raise more cash?

iClick Interactive Asia Group 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. Over the last twelve months, opex (excluding one-offs) increased by 10.08%, which is relatively reasonable for a small-cap company. My cash burn analysis suggests that, if iClick Interactive Asia Group continues to spend its cash reserves at this current rate, it’ll have to raise capital within the next 5 months, which may be a surprise to some shareholders. Furthermore, even if iClick Interactive Asia Group kept its opex level at the current US$58.39M, it will still be coming to market in the next couple of months. Although this is a relatively simplistic calculation, and iClick Interactive Asia Group may reduce its costs or raise debt capital instead of coming to equity markets, the outcome of this analysis still gives us an idea of the company’s timeline and when things will have to start changing, since its current operation is unsustainable.

Next Steps:

The risks involved in investing in loss-making iClick Interactive Asia Group 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 cash burn analysis result indicates a cash constraint for the company, due to its high opex growth and its level of cash reserves. An opportunity may exist for you to enter into the stock at an attractive price, should iClick Interactive Asia Group come to market to fund its operations. I admit this is a fairly basic analysis for ICLK’s financial health. Other important fundamentals need to be considered alongside. You should continue to research iClick Interactive Asia Group to get a better picture of the company by looking at:
  1. Future Outlook: What are well-informed industry analysts predicting for ICLK’s future growth? Take a look at our free research report of analyst consensus for ICLK’s outlook.
  2. Valuation: What is ICLK worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether ICLK is currently mispriced by the market.
  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 2017. This may not be consistent with full year annual report figures. Operating expenses include only SG&A and one-year R&D.