Read the co.’s presentations, Q's, K's, press releases, and other SEC filings. They should provide you with a good picture.
SKBI is in a high-growth mode, so it needs cash for capex and working capital (inventories and receivables, etc.).
Vaccines and Micro-Organism, 2 of the highest margin (“sky-high” margin is a better term) product lines, have capacity constraints. So the co. ramped up its capex to expand these 2 product lines. The expansion in the Micro-Organism and Vaccines are expected to complete by 4Q09 and 1Q10, respectively. We should have an update on the progress of these expansions when they announce their 4Q09 and 2009 results. I wouldn’t be surprised if the vaccines, which need government certifications, incur some further delay. (Since when the government employees do things in a hurry? But I don’t think there is any need to over-react if this happens; because this could happen to SKBI, it naturally could happen to all its competition. Government certifications will thus become a barrier to entry.)
The co. raised $21M (gross) in 7/09. Therefore, even after the above-described capex and working capital increases (a big portion of the capex, by the way, was already self-funded before it raised the funds in 7/09), the co. still has ample cash left to execute its acquisitions and expansion strategies. (Cash as of 3Q09 was $14.8M, or about 21% of current market cap!)
Give them a few more quarters.... still expanding customer base and like most China companies accounts receivables. Look at there last 10Q the majority of receivables are from 0-30 days.($4.266 million) Then the next greatest is 30-60 days. ($1.752 million)
Also from 10Q: "On average, we collect our receivables within 90 days. Historically, we have collected all of our accounts receivable and have had no write offs. This is attributed to the steps that we take prior to extending credit to our customers as discussed above. If we are having difficulty collecting from a customer, we take the following steps: cease existing shipments to the customer, our sales force actively calls and goes to the customer’s site reminding the customer of their past due invoice and requesting payment, and if those methods are unsuccessful we use our outside legal counsel"
They have had a good record so far. They are just growing so fast that it will continue to grow. It is something I will look at when the 10K comes out.