Latest / Investor Exchange / Is The Global Timber Shortage About To Change Everything For Sitra Holdings? – FY2025

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Is The Global Timber Shortage About To Change Everything For Sitra Holdings? – FY2025 · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:07
  Welcome back to the Deep Dive. Today, we are setting a very clear mission for you.
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  Right. Today's Deep Dive is really a focused investor briefing.
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  Exactly. We're getting right into the weeds. We are looking at the official
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  full year 2025 financial results for Citra Holdings.
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  Citra Holdings International Limited, to be exact. Yeah.
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  And they just released these numbers on February 20th, 2026.
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  And it is a fascinating document to decode. It really is.
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  Because look, Citra is a company that, well, they mostly deal in wood-based
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  products and, you know, outdoor lifestyle furniture.
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  Right. That's their public-facing identity. Yeah.
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  And they just reported this massive 21% jump in annual revenue.
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  Which sounds incredible.
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  Right. It sounds like a total home run. But for an investor,
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  cop-line growth is really only half the story. Barely half, honestly.
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  Yeah. So I'm super excited to dig into these numbers with you.
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  And our goal for you today is to decode this financial performance,
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  analyze the actual cash flow, and figure out the true outlook for this company.
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  Right. And we're going to do all of that using simple, jargon-free language.
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  No MBA required today. Definitely not. Because understanding the mechanics of
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  corporate financial health shouldn't be a mystery.
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  So let's just jump right in. Let's start with that seemingly great news,
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  the top line. The revenue surge. Yeah, the surge in sales.
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  Because Citra's revenue increased by over 2.6 million Singapore dollars.
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  It's just a very solid bump. It is. It brings their total revenue for the year
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  to 15.38 million dollars. Right.
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  Now, we need to unpack exactly where that growth came from. It wasn't just across the board, was it? No.
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  The European market was undeniably the star performer here. You really crush it there. They did.
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  Sales in Europe surged 30 percent, bringing in 8.57 million dollars.
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  And then you look at the Australia and New Zealand market.
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  The ANZ region, yeah. Right. That market also grew 10%. That brought in $6.22 million.
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  So their international sales footprint is definitely expanding.
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  It is. But we need to look at what they're actually selling to those markets.
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  Right. Because despite having that very nice outdoor lifestyle furniture label.
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  The premium branding. Yeah.
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  Despite that, a massive 96% of their revenue comes strictly from what they call wood-based products.
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  Exactly. $14.73 million of their revenue is just wood products.
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  It's not the fancy lifestyle furniture driving this growth.
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  No, it's not. And what's fascinating here is that while demand for their physical
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  products is clearly very strong in these markets, you as an investor really need to look deeper.
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  Because top-line revenue can be totally deceiving. Completely.
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  Selling more products doesn't automatically mean you are making more money.
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  Okay, let's unpack this, because this is where we have to pivot to the bad news.
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  For a reality check. Yeah.
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  If revenue is up 21%, why on earth did the company's net loss actually widen?
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  And it widened by 11%. Right.
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  They ended the year with a net loss of nearly $1.3 million.
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  So they are selling more, but losing more money.
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  To understand why, we need to explain the concept of gross margin.
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  Okay, break that down for us. Gross margin is basically the profit you have
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  left over after paying the direct costs of making your goods.
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  So just the raw materials and the direct labor to physically produce this stuff.
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  Exactly, before you pay for the office or the marketing or the executive.
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  Because the cost of the goods themselves. Right.
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  Now remember how Citra's revenue rose by 21%? Yeah.
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  Well, their cost of sales spiked by 24%. Oh, wow. So costs outpace sales. Yes.
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  Their direct costs hit $14.24 million.
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  And because those costs rose faster than their sales did, their gross margin
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  physically shrank. It got totally crushed.
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  It did. It went from an already thin 9.39% down to just 7.36%.
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  Operating on a sub-8% gross margin is incredibly tough.
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  It leaves almost zero room for error.
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  So why did this happen? When you look at the source documents,
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  management actually explicitly blames this on a, quote, large increase in material
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  prices due to the tight supply of material.
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  Which makes perfect sense when you look at the broader global picture.
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  Right, the macro environment.
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  Exactly. Global supply chain issues and intense geopolitical tensions are making
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  it incredibly expensive to move physical wood around the world.
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  And they clearly don't have the pricing power to pass those costs on to their
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  customers in Europe. No, they are absorbing those costs themselves just to close the sales.
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  They are essentially being forced to sell at a much lower margin.
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  Which ultimately results in a basic loss for the equity holders.
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  A loss of 0.08 cents per share, to be precise. Yeah.
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  But to be fair to management, they didn't just sit back and watch this happen.
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  No, they did try to stop the bleeding.
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  Yeah, they actively cut their operating costs. Yeah. Their administrative expenses
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  actually dropped by 14%. That's a meaningful cut.
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  It is. They saved on repairs, maintenance. They cut employee compensation.
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  And they also dropped their selling and marketing expenses by 8%.
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  So they are trying to enforce financial discipline. Right.
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  But was it enough? Well, this is where we need to introduce operating cash flow.
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  The ultimate truth teller on the balance sheet. Exactly.
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  Operating cash flow tracks the actual physical cash generated or used by the
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  day-to-day operations of the business. Stripping away all the accounting tricks.
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  Right. And despite cutting all those administrative costs, Citrus still burned through cash.
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  They burned through $122,503 in operating activities.
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  Which means the core business of selling wood is currently draining the bank
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  account, not filling it. But wait, if they're burning cash every day,
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  I found a really specific, crucial detail in the cash flow statement.
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  Oh, the bank balance. Yeah.
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  How did they keep the lights on and actually end the year with $325,484 in the bank?
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  That is the million-dollar question, or rather, the $381,000 question. Exactly.
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  They received a director advance of $381,000.
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  A personal loan from a company director. Right. And for you,
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  as the listener evaluating this company, why does that matter so much? It matters immensely.
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  Relying on personal loans from a director to fund your daily operations is a
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  major, major warning sign for an independent investor. It's a huge red flag.
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  It indicates that the core business simply isn't sustaining itself.
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  If that director decides to stop writing checks, the company faces an immediate liquidity crisis.
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  It's basically life support. It is. The traditional avenues for corporate funding
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  might be totally closed off to them right now.
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  Okay, here's where it gets really interesting. The hidden layer. Yes.
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  Because if the core business is bleeding cash, why keep it alive?
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  Why write that $381,000 check?
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  It turns out Citra has a whole other side to its business. They have a property development segment.
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  And this changes the entire narrative of the company. We have to look at their PPE.
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  Which stands for property, plant, and equipment. Right.
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  For those who aren't familiar, PPE simply refers to the physical long-term assets
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  a company owns. The buildings, the land, the machinery.
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  And Citra's biggest asset isn't a warehouse full of timber.
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  Not at all. Their biggest single
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  asset is a piece of vacant leasehold land located in Bintan, Indonesia.
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  Bintan. Yes. And that raw land is valued on their books at $5.72 million.
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  Almost $6 million just sitting there. It's earmarked for a future resort and apartment project.
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  But crucially, construction hasn't even started yet. It's just dirt. Very valuable dirt.
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  And they did something really clever with some of their other properties, too.
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  Management took a parcel of leasehold land, a factory, a warehouse, and an office space.
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  All in Indonesia as well. Right. And they reclassified them.
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  They moved them into a category called investment property. Which they value at $3.4 million.
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  Exactly. And the reason they reclassified it is because in March 2024,
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  they actually started leasing it out. They became landlords.
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  Yeah, and that move generated about $224,000 in rental income for the year.
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  Which is brilliant, strategically speaking. It's a small but very stable bright
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  spot. It's totally decoupled from the chaotic global timber market. Right.
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  It provides them with a stable stream of cash flow while the core business struggles.
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  And having that rental income probably helps them manage their massive debt
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  load because they have a $1.85 million liability hanging over them.
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  Yes, that debt is related to their acquisition of Mapoor Rocky Resort Limited.
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  Almost $2 million in debt while burning operational cash is terrifying.
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  It usually leads to default.
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  But management secured a major strategic win here. They successfully renegotiated
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  this debt. They pushed it back. Way back.
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  They pushed the final payment deadline all the way to December 2031.
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  It buys the much-needed breathing room. It ensures that the debt won't crush
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  them in the immediate short term.
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  So what does this all mean for you? If you are an investor looking at the year
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  ahead, how do you value this?
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  Well, we should start with the company's own warning. The prospect statement.
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  Right. In their own words, the competitive landscape is uncertain.
• 9:17
  They expect geopolitical tensions, tight material supply, and weak demand to persist.
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  They are basically saying the headwinds aren't going away anytime soon.
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  The margins will stay compressed. Exactly.
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  Their stated strategy now is to just optimize operations and explore opportunities
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  to diversify their revenue streams.
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  Which probably means leaning harder into that real estate portfolio to ensure
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  long-term sustainability.
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  That's the most logical read of the situation. Now, there's one final highly
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  relevant fact for investors.
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  Dividend reality. Yeah. Citra declared zero dividends this year.
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  And that isn't just a choice by the board to save cash. It's actually the law. Explain that.
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  Under the Singapore Companies Act, a company cannot pay dividends unless they
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  have accumulated profits to distribute.
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  And since Citra has been running at a loss, they legally don't have the profits to pay out.
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  So this is absolutely not an income generating stock. You are not buying this
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  for a quarterly dividend check. Definitely not.
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  It makes Citra either a highly speculative turnaround stock or an asset play
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  stock. Right. So let's wrap this up.
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  Citra Holdings is a company that is successfully growing its sales footprint
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  in Europe and Australia.
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  That's the good news. But the bad news is they are being severely squeezed by
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  global supply chain costs.
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  They're burning through operational cash. And they are relying heavily on personal
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  loans from a director and their Indonesian property assets just for stability.
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  It really leaves you with a profound question to mull over. It does.
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  If Citra's core wood distribution business is losing money on every single sale
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  due to these global headwinds, and their most valuable assets are actually undeveloped
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  land and lease factories in Indonesia,
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  is Citra Holdings actually just a real estate holding company disguised as a furniture business?
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  That is the exact question you need to be asking yourself if you're looking at their stock.
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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.