September 4, 2014 (Chinavestor) The following analysis takes a look at cash flows for Youku Tudou (NYSE:YOKU). Cash from operating, investing and financing will come under review as well as free cash flows.
Note: Capital Expenditure = Investment in property, plant and equity + Purchase of intangibles
Figure 6 shows that investing cash flow is the major component of cash flows, indicating the company’s emphasize in capital expenditure as well as purchase of intangibles (copyright costs). Operating Cash Flow is rising as a more significant part of cash flow with its sustained improvement since 2013Q2, indicating a better cash-generating efficiency from the company’s operations. Financing cash flow generally takes a small proportion of the company’s cash flow.
Operating Cash Flow:
Starting from negative income, Youku Tudou’s operating cash flow shows a general improving trend. This is due to more depreciation & amortization rising from the increasing fixed asset and intangible asset.
A detailed look at the company’s 2013 annual report above shows that depreciation of fixed assets went from 45,670 thousand in 2011, 81,609 thousand in 2012 to 111,098 thousand in 2013; and amortization of intangible assets almost doubled each year from 166,576 thousand in 2011, 416,396 thousand in 2012, to 788,299 thousand in 2013. This significant increase comes from the company’s rising investment in copyright contents in online video library building and bandwidth cost in user experience improvement.
Investing Cash Flow:
From the above quarterly table, changes and volatility of investing cash flow mainly comes from purchases and sales of short-term investments. Major revenue for investing activities comes from proceeds from maturity of short-term investments, which amounts to 2827 million CNY in 2012 and 2990 million CNY in 2013. Major consumption for investing cash flow comes from purchases of short-term investment, which amounts to 3536 million CNY in 2012, and 2284 million CNY in 2013.
To be continued...