Will Choppies face bankruptcy because of this?

Choppies has a big risk problem

Author

Boago Sephutho
October 03, 2024

Hello, check this information out:

New major risk - Financial position

The company's interest payments are not well covered by earnings.

Net interest cover: 2.4x

This is considered a major risk. If the company is unable to fund interest repayments on its debt through profits, it may be forced into reducing its debt burden through selling assets, undertaking a potentially costly capital raising or even into bankruptcy in the worst case scenario.

Currently, the following risks have been identified for the company:

Major Risk

Interest payments are not well covered by earnings (2.4x net interest cover).

Minor Risks

Unstable dividend paying track record with dividend experiencing an annual drop of over 20% in the past.Large one-off items impacting financial results.Market cap is less than US$100m (P940.6m market cap, or US$71.9m).

Now in my last post about Choppies, I sold my shares after realising that it has more debt than I like seeing in a company. The fact that they might have to sell assets or venture into capital raising is a cause for concern for buying into it, but it goes down to you as an young investor, have a look at it yourself and make your own decision.