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QuestionsCategory: Investor PsychologyPotential inconsistent message under Capex topic
Geno Chang asked 5 months ago

Hi,
Should the focus for an investor be heavier on the development capex or maintenance capex; and can you also elaborate on it?
From the explanation para in the module, it is mentioned that “Hence in our opinion, CAPEX is good for a company if it predominantly spends it on development CAPEX that generates more revenue for business”, however it is explained in the video stating that “we as investor to focus on maintenance capex”.
it feels like there’s a contradictory message from the above. Therefore, I would like to confirm get a clarification on the messages.
Best regards, 
Geno

1 Answers
Victor Chng answered 5 months ago

Hi Geno,
 
What I am trying to say in the video is, when collecting Free cash flow (FCF): the formula is usually cash flow minus maintenance capex. There are some cases where the capex is lump up with development capex which cause FCF to be negative. In such scenario, it is still all right for the business as they are spending on development capex to grow the business’ revenue. Hope this help to clear your doubts. :)

Geno Chang replied 5 months ago

Thank you!

Victor Chng replied 5 months ago

Welcome Geno :)