one other big problem they have is their current setup is a total disaster for attracting institutions. search - floating stock definition investopedia - the reverse split gave hqcl a very small public float of 5 million shares which increases risk. institutions will not invest big time in very small float stocks and especially a small float stock 94% owned and controlled by a korean chaebol. they really need to make this a real public company, not a family owned chaebol with a 6% float so they can use the capital markets. besides, of course needing profits, institution will not touch this en masse in its current formation.
the reverse split could have triggered a much higher risk level in association with trading this and therefore maybe etrade initiated the call to protect themselves. search - floating stock defintion investopedia - small float stocks are deemed much more risky and in some cases can become harder to sell. if a stock is deemed as a risk of being harder to sell, brokerages want to make sure you really want to buy it. the public float is only 5 million shares on hqcl after the reverse split. as you can see from the investopedia entry, institutions do not like small float stocks and they surely do not like stocks 94% owned by a korean chaebol family, with a small 5 million public float, in times of market selloffs or crashes, these can become extremely volatile and illiquid. etrade limits their liability in brokering these by requiring phone calls which gives them a level of protection should anybody calim they were brokering hig risk stocks.
the stock did not drop from $20 to $8 because people had to call. a 5 minute phone call hardly makes it that harder to buy. etrade required people to call because it got flagged as some sort of risk and they want to protect themselves for some reason. a call, of which brokerages record, leaves them no liability because they have proof you really wanted to buy this. etrade makes its money on commissions, they do not execute a plot to get hqcl inventory cheap. that would imply that etrade required a call to try and make it harder to buy and easier to sell so etrade could build a inventory position in hqcl cheaper for themselves. they do not do that and it would be illegal. etrade is only interested in protecting their liability in brokering a security that has been flagged as some sort of extra normal
risk, what effect that would have on the stock price is no concern to them. they just want to protect themselves legally. who knows why, but hqcl got flagged as some sort of increased risk for them to broker and the call that a person makes gives etrade a recorded phone record that you made the decision and really want to buy this.
that is one of the main reasons. for some reasons hqcl was flagged as some type of risk for online brokerages who then require you to call so they do not have any liability if something goes wrong. brokerages record the phone calls and therefore have a concrete record that you really wanted to buy it. hard to say what the reasons are exactly. could be a combination of reverse split, small float, stock sunk 50% plus since reverse split, and small market cap on the float percentage. a long time ago a company with ticker deer got delisted an etrade required even sellers to call. but it definitely got flagged as some sort of risk factor. the recorded phone call gives the brokerage a concrete record that you wanted to buy this. on the other hand, like the post below says, just call. only takes 5 minutes. for decades traders used phones for orders.
it does not seem to matter with their margins. $338 million revenue gets down to an operational income of $1 million and then$14 million interest expense to pay results in a loss. they are selling a good product for peanuts in profit. revenue increases for them unfortunantly just results in a few more peanuts. then they will do a huge dilution, and with a 94% ownership, institutions will stay away. they can increase margins some but they really need to have a higher selling price for the products or it is just more peanuts endlessy. with all the competition, it is hard to raise prices. they had 12% more shipments this quarter over last quarter, but it only raised revenue from $335 million to $338 million. why did it not raise revenue at least 10% or a good $30 million. 12% more shipments only increased revenue less than 1%. was it quarter specific or why does 12% increase in production shipped out only increase revenue less than 1%.
they have already indicated they most likely will do a major secondary offering next year which will increase the public float. they have to pay the debt.
it is not fraud. it is called trading. traders and speculators start taking some positions ahead of earnings which increases volume and in this case rose the price from $9 to the $12 range. as it rose, more traders buy and it rises more. they hope a good earnings will pop it and they can either sell or ride it up more. this is also a traders stock and it is not fraud. it is how the markets work. every stock has a certain amount of short term traders and speculators. the problem with it rising a lot more is the margins. $338 million revenue gave them $1 million in operating income before $14 million interest expense and they lost money. they sell a lot of good product to make peanuts and then interest wipes that out.
did you really check out hqcls operational costs last quarter. they had $335 million revenue, after costs of goods sold $48 million, after selling and marketing $4 million and that was before $11 million in interest due. and all that was after a 53% increase in revenue for the quarter yoy. those are terrible margins to the bottom line. as far as debt, hopefully they can restructure, hanwha will not want to sell its stake and then take that money and use it to pay the debt. that is the families investment money. it would go to them. would you sell your shares and pledge the money to hqcl to pay down the debt. no. that is your investment money. hqcl will either restructure or have to do a major dilution, but if hanwha family sold some of its stake, they would not use to pay the debt, the money would be gone. just as you would not sell your shares and give it to hqcl to pay down the debt. your money would be gone.
that is a big problem. their margins. they had $335 million revenue last quarter and after costs of goods sold and selling and marketing expenses, there was $4 million profit. and after that $11 million in interest expense still to cover. even increased revenue does not translate to much on the bottom line. they will use the capital markets to grow and then some year or decade, they can easily take it private if they want. great strategy for them.
they have a good product but as a long term investment it has so far failed miserably. but can be a good stock to trade and hope for the long term. look at all the graphs. from the 2 year graph, you can see the trends of the last 2 years. it is definitely in a down trend as of late and no one knows the bottom for sure, if it gets some good news, the trend could reverse and traders could hop in quickly to try and ride an uptrend. the safest way to play thisstock is to buy it only when it is clearly in an uptrend fueled by good news and seems to be sustained more than a quick pop. and when the uptrend ends, be prepared to exit if it starts back down. you can look at the 2 year graph and usually clearly see the short term trending.
it is a family owned company, 94%, and therefore, their long term strategy is for the family and to use the capital markets for financing and growth. but that is capitalism, better than you know who, kim jung puke.
although, they have had a few reputation problems.
search - corpwatch ceo hanwha jailed -
happens everywhere for sure, but the strategy will be for the hanwha 94%, not the 6%.
this could easily pop back up to $14 which is 50% from here. a good traders stock if the momentum changes. long run it is a family owned business using the capital markets to finance it, pay debt, and then grow it for a future private takeover years in the future for probably a small premium. with hanwhas money, they can do it. good gig for hanwha and traders to ride the trend if it starts back up some. but this is a 94% family owned business and the family always comes first.
search - corpwatch ceo hanwha jailed -
basically, the above post by gman has been written about 1000 times over the lasts 7 years as hsol, hqcl, has fallen from $10 to below a $1. doc used to promote every deal for 5 years. they have closed deals for 7 years. a traders stock here that can drop and rise and drop and rise but a big trap for long term investors up to this point. doc promoted how advanced their solar was for 5 years, every product enhancement, every new deal, more revenue. big revenue, minimal profit from it, and then a $1.4 billion debtload, with a good $600 million shortfall to cover by restructuring and dilution is a big problem.
the volume shows at 45,000 today, quite average. volume can come from a lot of selling or buying, an increase in volume does not equate a rise or necesarily a fall. the overall market is in a bad spell too which does not help. but hqcl increased revenue 53% the 1st quarter year over year but margins improved only slightly. they made $4 million last quarter off of $335 million revenue but that was before $11 million interest expense. even a big increase in revenue with those margins does not generate much more to the bottom line unless they make selling and marketing expenses much more efficient. but if they pay back a lot of debt principal, that will put them into a loss. it will look better on the income statement if they do not service the debt principal but then their debt situation becomes very alarming unless they come up with a restructure plan. traders can push this up and down fast depending on the news but with a family owning 94%, all that debt, institutions will have no interest. it is not a public enough company at this point. it is more of a private family company that has a small 6% float so they can use the capital markets to fund the expansion of their business. they could do this for years or the next decade and then when finished take it private and reap all the awards in the future for the family. institutions will not really be interested.
they had about $335 million revenue last quarter and after costs of goods sold about $48 million gross income and after marketing and selling expenses about $4 million profit before restructuring and still after that $11 million in interest expenses to cover. so with margins like that and even with increased revenue, how could there be that much profit. and that is if they do not service any of the loan principals that have come due. i think you are expecting too much. just hope they detail some plans on how they might restructure the debt.
hqcl does not set the target price or their ir department.
that comes from the analyst that cover it and can be seen from the link analyst opinion on the left side near analyst estimates.
1 broker gave this a 5 a long time ago and it has not been covered since so it just remains 5.
it is meaningless, as even the current estimates for other companies hardly ever turns out to be that in 1 year.
if you look at their march 31, 2014 balance sheet and then the march 31, 2015 balance sheet, you see a lot of debt has come due this year. and it will hang because they have no way to cover $1.4 billion even using all liquid current assets. therefore, they have to dilute. and they did a reverse split because $11 per share looks better than $1.1. and if it is below $1 a long time they have problems. and they can not control the share price that much. look at the 7 year graph. the big reason a company would want the share price to sink long term endlessy is so they can take it private some year really cheap and use long term shareholder funding to build the company for them. they can not get it to go up much because after $335 million revenue last quarter and then less costs of goods sold and selling and marketing expense, they had a whole $4 million left. and $1.4 billion in future debt to pay someday, which means booking some mean losses some year.
i did take accounts receivable and nextera into consideration.
$1.4 billion current liabilities.
current assets with receivables included comes to around $700 million liquid assets although the receivables are not that liquid yet.
conservatively they might be able to use $500 million of that or lets say $600 million to counter debt that is current.
$1.4 billion less $600 million leaves $800 million shortfall.
now revenue last quarter was $335 million less costs of goods sold gave $48 million gross income, then less selling and marketing expenses they had $4 million income before non-recurring charge.
annualized gross income would be about $200 million and less selling and marketing would be $16 million profit annualized.
but lets double that for nextera, instead of $50 million gross income, they make $100 million gross income per quarter for 4 quarters which is $400 million gross income and less selling and administrative, they make $200 million profit which will not happen because their selling and marketing expenses are way over 50% of gross income. even so, $200 million profit, if nextera and other contracts doubled their revenue from last quarter and they realized that for a whole year.
very very liberal $200 million profit in 1 year.
therefore, $1.4 billion current liabilities less $600 million from accounts receivables and other liquid current assets leaves $800 million shortfall, then less $200 million profit all put towards debt leaves $600 million current debt shortfall.
$600 million current debt shortfall to cover through new debt, debt restructuring, and major 2016 dilution will heavily weigh on stock price and when they book the debt repayments as expenses leave them with big losses on income statement.
a lot is the amount they can get for their product and the costs.
if you look closely at their march 31, 2015 income statement.
you see $335 revenue which is great and up from the previous year but after costs of goods sold, you are left with only $48 million gross income, after selling expenses, and not including recurring charge, they made a whole $4 million.
as they increase revenue, they can become more efficient somewhat with costs of good sold but that will still increase and they can become more efficient with selling expense.
unless they do that, even with revenue increases their bottom line after these expenses are minimal.
with revenue increases this year from nextera and others and with more efficiency. it would be a lot if they increased the $4 million they made last quarter before non-recurring charge up to $25 million a quarter which is probably unrealistic.
even so, annualized that would be $100 million which will not happen.
but see the income statement for march 31, 2015 after selling expenses and everything are the other expenses. they hardly paid anything last quarter. they have $1.4 billion in current liabilities. whether this year or next, they have to be paid someday and the expenses booked. when they get booked it assures future losses. so the only way to make money is to endlessy not book these as paid and push them forward, which they can not do. so their has to be future losses.
i did account for those items.
read the first 2 posts.
$1.4 billion current liabilities.
$500 million in current assets to use.
that includes accounts receivables.
they have a little more in current assets liquid if they use restricted cash to and every receivable is paid in but to use $500 million in 1 year would be a lot, but this takes in effect getting their receivables paid and used totally.
so that is conservative $500 million in current assets to use including the receivables they take in.
also, i included increased revenue from nextera.
they reported for the 1st quarter $50 million gross income.
after selling and administrative expenses and like expenses not including restructuring charge, they had left about $4 million.
but $50 million gross income 1st quarter minus selling expenses and administrative of only $25 million which is way less than they have leaves $25 million in a quarter.
annualized is $100 million and then doubled to include new revenue from nextera and others gives at most $200 million to use towards debt and nextera will not double this in one year but i did anyway to be very liberal.
so $1.4 billion current liabilites.
conservatively they might possibly use $500 million from current assets if all receivables were paid.
and then gross income annualized and minus selling and all the other expenses, annualize and double it for nextera gives at the most $200 million, which is way overestimate.
but $500 million current assets.
plus $200 million revenue after expenses including doubling for nextera increase is $700 million.
$1.4 billion less $700 million is a $700 million debt shortfall on current liabilites.
the fact is 1st quarter gross income 2015. $50 million minus selling and other expenses and no restructure charge gives $4 million excess funds 1st quarter. times 50 equals $200 million.
nextera will not increase the bottom line there 50 times over.
the bs part was about the post saying all the liabilities are to hanwha. cheers.
$1.4 billion current liabilites.
$256 million related parties.
hardly a majority.
but does not matter, current liablities are current liabilites.
they either pay it and post major losses or restructure it and pay it later.
it does not go away.
are you in the fantasy financial world.
you think they can book $1.4 billion in current liabilites and then laugh it off as they only owe it to related parties.
you can be sure, the related parties want that money and intend to get it , they will not forget about it.
means hqcl needs to do a huge dilution to bring in some more money from outside investors so it can be funneled to the families.
cheers and send them some more of your money when they issue new stock.
the related parties will be glad you helped hqcl pay their debts.