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Why British & Malayan Holdings HY2025 Loss Masks A High-Growth Pivot · Investor Exchange

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  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
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  Welcome back to another Deep Dive. Today, we are opening a file that looks at
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  first glance like a pretty standard financial report.
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  A very old, very established company. Right. But when you start to peel back
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  the layers, it feels a lot less like accounting and, I don't know,
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  more like a detective story. It really does.
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  We're looking at British and Malayan Holdings Limited, or BMH.
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  And for anyone who doesn't know, this isn't some flashy tech company.
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  Not at all. These guys have been around for over a century. They're in the business
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  of trust. I mean, literally.
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  Trustee services for families, corporations. It's usually a very steady,
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  predictable world. Usually.
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  But the financial results they just put out for the half year ending December
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  31st, 2025 are, well, anything but sleepy.
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  It's a classic good news, bad news situation.
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  That's the perfect way to put it. The tension is real.
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  On one hand, you have the income statement showing some, you know,
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  really impressive growth. Revenue is climbing.
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  But on the other hand, you have the balance sheet and the cash flow statement,
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  which tell a story of some pretty significant cash burn. And that's our mission today.
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  We're going to put on our investor hat. We need to figure out if this is a company
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  that's successfully turning a corner or if they're burning the furniture to keep the house warm.
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  It's a vivid analogy, but it's an appropriate one. And our evidence for this
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  is the half year announcement and their financial statements.
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  OK, so let's start with the good news side of the ledger. You just looked at
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  the top line, the revenue. Right.
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  You'd probably be pretty happy. You might be. The headline number is $877,000
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  in revenue for the half year.
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  And that's a 17% jump compared to the same period last year.
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  And that's a big deal in this industry, right?
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  It is. In the world of trustee services, you don't typically see these double-digit
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  growth spikes. It's a mature business.
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  So yeah, 17% really stands out. Where did that come from? Was it just them raising fees on everyone?
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  It doesn't look like it. It looks like genuine volume. The documents break it
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  down. And the heavy lifter was trustee fees.
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  That one line item was over S-602,000 dollars.
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  So they're actually winning new clients. It suggests they are.
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  They're getting signatures on contracts, which is the hard part.
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  And that's incredibly sticky revenue, isn't it?
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  I mean, once you pick a trustee, you don't just switch them out six months later. Exactly.
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  The switching costs are huge. So when they land these clients,
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  that sex $602,000 should, in theory, become a stream of income for years.
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  That's the bull case. I also saw another number in there that caught my eye.
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  Other service fees. The jump was pretty wild.
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  It was. It went from about $502,000 last year to over S-273,000 this year.
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  More than double. What kind of thing falls into that bucket?
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  It's likely ancillary services, maybe, you know, tax filing help,
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  special administration fees, or maybe one-off setup fees for those new clients.
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  It's a good sign. Shows they're not a one-trick pony.
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  Right. They're finding more ways to monetize their client ways.
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  Okay, so the core engine is revving up. But there's a second engine here,
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  and it's a line item that can be confusing.
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  Share of profit from equity-accounted associate. Right. It's a bit technical,
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  but it's crucial for BMH.
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  The simple way to think about it is, imagine you own a restaurant,
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  but you also bought a 30% steak in the bakery next door.
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  You don't run the bakery. But because you own a big chunk of it,
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  accounting rules let you claim 30% of their profit on your own income statement.
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  So BMH has a bakery next door that's doing really well. In a manner of speaking, yes.
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  And this associate is having a great year. The profit share from it jumped to S$353,000.
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  That's up from just $72,000 the previous year. Wow, it more than doubled.
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  It did. But I have to be the skeptic here.
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  Is that S-153,000 actual cash in the bank, or is it just a number on a spreadsheet
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  to make the profit look better? That is the key question.
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  Generally, with equity accounting, it's a paper profit unless that associate pays out a dividend.
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  It boosts their total income line to S-1.1 million dollars, but it doesn't necessarily
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  help them pay the rent on Friday.
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  And that's a vital distinction because despite all this growth,
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  when we get to the bottom line, the picture changes a lot.
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  It really does. Despite $1.1 million in total income, they posted a loss.
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  A loss of S714,000.
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  Correct.
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  Now, to be fair, management will point out that this is an improvement.
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  Last year, the loss was $793,000.
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  So they've trimmed it by about 10%. Right. They're moving in the right direction.
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  Sure. Less bad is better than worse. But a $700,000 loss on S1.1 million of
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  income is still a pretty steep deficit.
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  Where's all that money going? It's the classic problem for a service business.
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  If you look at the expenses, one number just blocks out the sun.
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  Employee benefits. Salaries, bonuses, all that. Right. That number was $1.04 million.
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  Wait, hold on. Let's do the math on that. Their revenue from customers was $877,000. Yep.
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  And their staff costs alone were over a million dollars.
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  That's it. So before they pay for rent or electricity or a single paperclip,
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  they're already underwater just on salaries. That sounds like a structural problem. It is.
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  Now, the good news, if you can call it that, is that staff costs were flat compared
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  to last year. So they're controlling headcount.
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  But they're stuck with this high fixed cost base. But if staff costs were flat
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  and revenue went up, the loss should have shrunk by more than it did.
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  Something else must have gone up. You're spotting the leak. You have to look at other expenses.
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  That bucket jumped 25% to S-678,000 dollars.
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  That's a big jump. What's in there? The notes are pretty specific.
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  Professional fees and commission expenses.
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  Ah, commissions. Yes. So let's go back to that growth story.
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  We said revenue is up 17 percent, and that's great. But if commissions are way
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  up, aren't they just buying that revenue?
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  That's the cynical but very valid take. It's their customer acquisition costs.
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  They're paying intermediaries, maybe financial advisors, maybe lawyers to refer
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  clients. So the big question is about sustainability.
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  If they stop paying those commissions, does the revenue growth just stop? It might.
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  But here's the counter argument. In this business, you pay the commission once,
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  but the client might pay you fees for 20 years. The lifetime value argument.
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  Exactly. So spending $50,000 now to get a client who pays you S $10,000 a year
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  for a decade is a fantastic investment.
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  It requires cash. You have to survive that upfront payment.
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  Which brings us to the part of the report that really got my attention,
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  the cash position. This is where the story gets a little scary.
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  Let's slow down here because the numbers are stark. Yeah. Let's go back to June 2025.
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  How much cash did they have? In June, the group had about $4.435 million in
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  cash and equivalents, a healthy amount. Okay, sample $4.4 million.
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  Now fast forward just six months to December. What's left? It dropped to S3.277 million dollars.
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  That's a drop of over 1.1 million dollars in six months. Yes.
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  Let's break that down. S1.1 million dollars.
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  It's roughly, what, S42,000 dollars flying out the door every single week?
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  When you put it like that, it really highlights the burn rate.
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  And remember, their accounting loss was only $714,000.
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  So the cash burn is actually much higher than the reported loss.
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  So where did the extra cash go? It's a mix of working capital changes and some investing activities.
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  But regardless of where it went, the fact is the liquidity pool drained by 25% in half a year.
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  And if you're a shareholder, that trend is terrifying.
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  Simple math says you have about 18 months before the lights go out.
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  That would be true if cash were their only liquid asset. But we need to look
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  at the safety net. This is why they aren't in immediate danger.
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  OK, what's the safety net? They have a line item called other financial assets.
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  It's worth about several hundred two point two million dollars.
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  And what's in there? Is it some, you know, hard to sell property?
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  No, it's actually very high quality. The notes say it's Singapore government
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  treasury bills and commercial paper.
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  T-bills. OK, so that's basically cash. You can sell those in minutes. Precisely.
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  So to get the real liquidity picture, you add the S3.2 million dollar cash to
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  the S2.2 million dollars in these investments.
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  That gives them roughly 5.5 million dollars in total liquid ammo.
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  A 5.5 million dollar war chest.
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  Okay, that changes the math. At the current burn rate, that gives them,
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  what, two and a half, maybe three years? Roughly. Which is a decent runway.
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  It means they don't have to panic today. They have time to let this commission strategy play out.
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  There's one other hero on the balance sheet we should mention. Or the lack of one.
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  Debt. Zero borrowings. In a world with volatile interest rates,
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  having zero debt is a superpower.
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  Imagine if they had a $5 million loan. The interest payments alone would make
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  their loss so much worse.
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  It gives them breathing room. A lot of it. They don't have a bank breathing down their neck.
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  So they have the war chest, they have no debt, but they are still bleeding cash.
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  What's the plan to stop the bleeding? Well, management's commentary on the outlook is sober.
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  They call the domestic trust business competitive and challenging.
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  Which is corporate speak for it's really hard to make money right now.
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  It is. But they say they're working on increasing BMT's profile.
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  That's their subsidiary and strengthening the pipeline.
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  Which lines up with spending on commissions. Exactly.
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  They're trying to grow their way out of the problem. But there was a cryptic
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  little sentence in there.
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  It was vague, but it felt important. Did you see the bit about partners? I did.
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  They said they are in discussions for new opportunities with prospective partners.
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  Let's read between the lines. Why does a century-old trustee company suddenly
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  need a prospective partner? I think it comes down to one word.
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  Scale. The fixed costs in this industry, compliance, IT, legal,
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  are astronomical. It costs almost the same to run a trust company with 100 clients
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  as it does with 1,000. Exactly.
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  And BMH is small. They might be realizing they just don't have the scale to
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  be profitable on their own anymore.
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  So a partner could mean a merger or an alliance to share costs. It could be.
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  Or it could be a signal that they're open to being acquired.
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  If you have a valuable license, a century of brand heritage,
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  and a clean balance sheet, but you can't make a profit.
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  Sometimes the best move is to sell to someone who can. That has a whole other
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  layer of intrigue for an investor.
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  It's a definite possibility. And you can see the pressure building when you
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  look at the net asset value or NAV. Right. The book value of the company.
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  The NAV per share dropped from 94 cents in June to 86 cents in December.
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  That's a nearly 10% drop in six months. That's the cost of this turnaround.
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  They're spending the company's equity to try and restart the growth engine.
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  As an investor, your slice of the pie is shrinking today in the hope that it
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  creates a much bigger pie tomorrow.
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  It's a race against time. And speaking of shareholder value...
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  I assume there was no dividend. No, no dividend declared. And honestly,
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  if they had paid one while burning S1.1 million dollars in cash,
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  that would be a huge red flag. It would be totally irresponsible.
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  Completely. Management said they are conserving cash for business growth.
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  It's the only logical move they could make. Okay, so let's wrap this up.
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  We've gone from revenue spikes to cash drains.
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  If you had to give the bull case and the bear case for BMH right now, what would they be?
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  The bull case is that this is a turnaround story in the making.
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  Revenue is growing at 17 percent. They have a perfect balance sheet with zero
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  debt and a $5.5 million cushion.
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  And there's the wild card of a strategic partnership or even a buyout.
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  That's something telling.
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  OK, now the bear case. The bear case is that the core economics are broken.
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  They're losing over $700,000 a half year.
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  Their staff costs alone are more than their revenue.
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  And the growth they're seeing is expensive. It's bought with commissions.
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  It really does come down to that raise.
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  Can revenue grow fast enough to cover those fixed costs before the cash runs
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  out? That is the essential equation.
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  They are in a transition, transitions are expensive, and they're risky.
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  But they're also where the biggest opportunities can be found.
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  So for the listener who's been with us, what's the one question they should
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  be asking themselves as they look at this?
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  I would look past the accounting laws for a second and ask this.
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  Is the core business model scalable?
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  We saw that staff costs are flat while revenue is rising. That's the key.
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  If they can double their revenue without doubling staff.
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  This becomes a cash machine. But if every new dollar of revenue needs a new
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  dollar of expense... And they're just running on a treadmill.
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  Watch that operating leverage. That's the signal. Are they building a software
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  company that scales or a consultancy that doesn't? That's the distinction, exactly.
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  Well, British and Malayan Holdings has definitely given us a lot to chew on today.
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  A century-old mystery with a very modern problem.
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  It will be fascinating to see what the full-year results look like.
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  We will definitely be here to cover it. Thanks for guiding us through the numbers. My pleasure.
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  And thanks to you for listening. We'll see you on the next Deep Dive.
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  This content is intended to serve strictly and only as an informational,
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  independent, objective summary of recent events and should in no way be interpreted,
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  construed, or relied upon by any party as inside information or financial advice.