Advertisement
U.S. markets open in 26 minutes
  • S&P Futures

    5,306.25
    -2.00 (-0.04%)
     
  • Dow Futures

    40,173.00
    +29.00 (+0.07%)
     
  • Nasdaq Futures

    18,486.75
    -17.00 (-0.09%)
     
  • Russell 2000 Futures

    2,141.30
    +2.90 (+0.14%)
     
  • Crude Oil

    82.61
    +1.26 (+1.55%)
     
  • Gold

    2,231.00
    +18.30 (+0.83%)
     
  • Silver

    24.72
    -0.04 (-0.15%)
     
  • EUR/USD

    1.0817
    -0.0013 (-0.12%)
     
  • 10-Yr Bond

    4.2180
    +0.0220 (+0.52%)
     
  • Vix

    13.00
    +0.22 (+1.72%)
     
  • GBP/USD

    1.2646
    +0.0008 (+0.06%)
     
  • USD/JPY

    151.2020
    -0.0440 (-0.03%)
     
  • Bitcoin USD

    70,846.38
    +367.61 (+0.52%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,956.25
    +24.27 (+0.31%)
     
  • Nikkei 225

    40,168.07
    -594.66 (-1.46%)
     

What does National Electronics Holdings Limited’s (SEHK:213) Balance Sheet Tell Us Abouts Its Future?

National Electronics Holdings Limited (SEHK:213) is a small-cap stock with a market capitalization of HK$1.09B. While investors primarily focus on the growth potential and competitive landscape of the small-cap companies, they end up ignoring a key aspect, which could be the biggest threat to its existence: its financial health. Why is it important? So, understanding the company’s financial health becomes crucial, since poor capital management may bring about bankruptcies, which occur at a higher rate for small-caps. Here are few basic financial health checks you should consider before taking the plunge. Though, since I only look at basic financial figures, I suggest you dig deeper yourself into 213 here.

Does 213 generate an acceptable amount of cash through operations?

213’s debt levels surged from HK$2,692.3M to HK$3,382.2M over the last 12 months – this includes both the current and long-term debt. With this growth in debt, 213 currently has HK$751.4M remaining in cash and short-term investments , ready to deploy into the business. Though its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can examine some of 213’s operating efficiency ratios such as ROA here.

Can 213 pay its short-term liabilities?

With current liabilities at HK$1,575.1M liabilities, the company has been able to meet these obligations given the level of current assets of HK$1,754.3M, with a current ratio of 1.11x. Generally, for textiles, apparel and luxury goods companies, this is a reasonable ratio since there’s sufficient cash cushion without leaving too much capital idle or in low-earning investments.

SEHK:213 Historical Debt Dec 7th 17
SEHK:213 Historical Debt Dec 7th 17

Is 213’s level of debt at an acceptable level?

Since total debt levels have outpaced equities, 213 is a highly leveraged company. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses.

Next Steps:

Are you a shareholder? At its current level of cash flow coverage, 213 has room for improvement to better cushion for events which may require debt repayment. However, its high liquidity means the company should continue to operate smoothly in the case of adverse events. Given that its financial position may be different. I recommend keeping on top of market expectations for 213’s future growth on our free analysis platform.

Are you a potential investor? 213’s high debt levels is not met with high cash flow coverage. This leaves room for improvement in terms of debt management and operational efficiency. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. You should continue your analysis by taking a look at 213’s past performance analysis on our free platform to figure out 213’s financial health position.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.

Advertisement