Gems TV
At one point of time, I was holding on to these shares at $1.00, 3 lots. It was the darnest mistake to have bought them and i cut loss at $0.60. On hindsight, it seems to be a good choice since it is hovering around $0.20 now. But then, I should have cut loss earlier. More likely, I should have not bought it in the first place.
The recent FY report has just been released. Out of curiosity and a desire to understand the business model a little better, I decide to read up a little. Funny that I ought to have sought this understanding much earlier. We all do make mistakes.
The report is found here. They have reported a 49% increase in revenue but i am a little cautious. So yea.
Despite the increase in revenue, they made a loss of $29mil compared to last year’s profit of $7mil. Much of it is due to increase in the cost of goods, admin and selling expenses – all of which increased significantly. Their UK business does not seem to be doing very well and they have made aggressive expansion into other regions like Japan recently. Thus while losing market share and revenue in their ‘old areas’, they are increasing expenditure in new unchartered territory.
I’d suppose the most frightening thing is that their allowances for doubtful debts and inventory obsolescence have increased over 2000% and 700% respectively. This casts doubts on their business model on selling jewelery via their current channels now. Collection of payment seems problematic and gosh, they have problems clearing their stock which gets obsolete fast. Television revenue accounts for most of their income.
With the current inflation problem, cost of goods will continue to rise especially those of precious metals. The 2nd part of the double whammy will come from the economy slowdown. With the credit crisis spreading especially with the contagion in UK now, demand for luxury goods like jewelery will fall. Facing such a squeeze, Gems TV might have to struggle. Moreover, I would still prefer to go to a shop to buy jewelery.
Other financial ratios can be found here. They are not particularly sparkling as well.
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