CEB doing its best PAL cosplay
Q3/21 net loss of P8.2 billion, down 48% from Q3/20 net loss of P5.5 billion, and down 27% from Q2/21 net loss of P6.5 billion. There isn’t anything to be said that hasn’t already been said about the bloodbath in Cebu Pacific’s [CEB 49.75 2.79%] financials.
The delta variant restrictions widened CEB’s losses from Q2, and pushed CEB’s return to profitability further into the unknown.
CEB said that while it believes that COVID will continue to have a “material impact on its net sales, revenues, income from operations and future performance”, it is still “confident in its ability to raise cash for liquidity needs even if there were unprecedented losses incurred as a result of an expected slow recovery from this crisis.”
Despite that confidence, CEB declined to provide guidance with respect to “expected impact in succeeding periods” due to the volatile and unpredictable nature of the situation.
MB BOTTOM-LINE
Based on Q2’s burn rate, we predicted that the P24 billion that CEB raised selling equity and convertible prefs would last it until mid-2022, but now I’m not so sure the proceeds will last even that long.
If CEB ended Q2 with P17.5 billion left of the proceeds (P24 billion total, minus P6.5 billion in Q2 losses), lost P8.2 billion in Q3, and just yesterday reported that it only has about P1 billion left of its prefs proceeds, that means that it only has about P9.3 billion left; at a burn rate of ~P2.7 billion (based on its Q3 loss rate), that would give CEB only 3.4 months of “runway” left before the cash ran out.
At this pace, the well goes dry in mid-January. Granted, CEB says that it has over P11 billion in total cash and cash equivalents, but even considering every peso that it owns, the runway runs out at the end of January.
Unless something material changes, it looks like that equity-raising confidence is going to be put to the test as CEB’s management team will probably start the new year planning another share sale of some kind.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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