Small-caps and large-caps are wildly popular among investors; however, mid-cap stocks, such as Singapore Press Holdings Limited (SGX:T39) with a market-capitalization of S$4.0b, rarely draw their attention. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. This article will examine T39’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Don’t forget that this is a general and concentrated examination of Singapore Press Holdings’s financial health, so you should conduct further analysis into T39 here.
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Does T39 Produce Much Cash Relative To Its Debt?
T39 has built up its total debt levels in the last twelve months, from S$1.6b to S$2.1b , which accounts for long term debt. With this rise in debt, T39's cash and short-term investments stands at S$438m to keep the business going. On top of this, T39 has produced S$217m in operating cash flow in the last twelve months, resulting in an operating cash to total debt ratio of 11%, indicating that T39’s debt is not covered by operating cash.
Can T39 meet its short-term obligations with the cash in hand?
With current liabilities at S$811m, it seems that the business may not be able to easily meet these obligations given the level of current assets of S$653m, with a current ratio of 0.81x. The current ratio is the number you get when you divide current assets by current liabilities.
Does T39 face the risk of succumbing to its debt-load?
With debt reaching 49% of equity, T39 may be thought of as relatively highly levered. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses.
Next Steps:
T39’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. Though its lack of liquidity raises questions over current asset management practices for the mid-cap. I admit this is a fairly basic analysis for T39's financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Singapore Press Holdings to get a more holistic view of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for T39’s future growth? Take a look at our free research report of analyst consensus for T39’s outlook.
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Valuation: What is T39 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether T39 is currently mispriced by the market.
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Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.