How Financially Strong Is Asiaray Media Group Limited (HKG:1993)?
Investors are always looking for growth in small-cap stocks like Asiaray Media Group Limited (HKG:1993), with a market cap of HK$1.05b. However, an important fact which most ignore is: how financially healthy is the business? So, understanding the company’s financial health becomes essential, as mismanagement of capital can lead to bankruptcies, which occur at a higher rate for small-caps. I believe these basic checks tell most of the story you need to know. Though, this commentary is still very high-level, so I suggest you dig deeper yourself into 1993 here.
How does 1993’s operating cash flow stack up against its debt?
Over the past year, 1993 has ramped up its debt from HK$66.95m to HK$144.35m – this includes both the current and long-term debt. With this rise in debt, the current cash and short-term investment levels stands at HK$330.82m , ready to deploy into the business. Additionally, 1993 has produced HK$101.06m in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 70.01%, indicating that 1993’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In 1993’s case, it is able to generate 0.7x cash from its debt capital.
Can 1993 pay its short-term liabilities?
At the current liabilities level of HK$714.12m liabilities, the company has been able to meet these commitments with a current assets level of HK$1.04b, leading to a 1.46x current account ratio. Generally, for Media companies, this is a reasonable ratio as there’s enough of a cash buffer without holding too capital in low return investments.
Can 1993 service its debt comfortably?
1993’s level of debt is appropriate relative to its total equity, at 24.92%. This range is considered safe as 1993 is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. We can check to see whether 1993 is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In 1993’s, case, the ratio of 41.32x suggests that interest is comfortably covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.
Next Steps:
1993 has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at an appropriate level. Furthermore, the company will be able to pay all of its upcoming liabilities from its current short-term assets. This is only a rough assessment of financial health, and I’m sure 1993 has company-specific issues impacting its capital structure decisions. You should continue to research Asiaray Media Group to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 1993’s future growth? Take a look at our free research report of analyst consensus for 1993’s outlook.
Valuation: What is 1993 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 1993 is currently mispriced by the market.
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.
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.
