Yoma Strategic Holdings Ltd (SGX:Z59): Time For A Financial Health Check
While small-cap stocks, such as Yoma Strategic Holdings Ltd (SGX:Z59) with its market cap of S$597m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Evaluating financial health as part of your investment thesis is essential, as mismanagement of capital can lead to bankruptcies, which occur at a higher rate for small-caps. Here are a few basic checks that are good enough to have a broad overview of the company’s financial strength. Though, since I only look at basic financial figures, I recommend you dig deeper yourself into Z59 here.
How does Z59’s operating cash flow stack up against its debt?
Z59 has built up its total debt levels in the last twelve months, from S$254m to S$366m – this includes both the current and long-term debt. With this increase in debt, the current cash and short-term investment levels stands at S$104m for investing into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, though these low levels of cash means that operational efficiency is worth a look. For this article’s sake, I won’t be looking at this today, but you can examine some of Z59’s operating efficiency ratios such as ROA here.
Does Z59’s liquid assets cover its short-term commitments?
Looking at Z59’s most recent S$257m liabilities, it appears that the company has been able to meet these obligations given the level of current assets of S$679m, with a current ratio of 2.64x. For Real Estate companies, this ratio is within a sensible range since there’s a sufficient cash cushion without leaving too much capital idle or in low-earning investments.
Does Z59 face the risk of succumbing to its debt-load?
With debt reaching 41% of equity, Z59 may be thought of as relatively highly levered. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible.
Next Steps:
Z59’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. This is only a rough assessment of financial health, and I’m sure Z59 has company-specific issues impacting its capital structure decisions. You should continue to research Yoma Strategic Holdings to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for Z59’s future growth? Take a look at our free research report of analyst consensus for Z59’s outlook.
Valuation: What is Z59 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 Z59 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
