Yahoo Finance What does Dukang Distillers Holdings Limited’s (SGX:BKV) Balance Sheet Tell Us About Its Future?
Dukang Distillers Holdings Limited (SGX:BKV) is a small-cap stock with a market capitalization of S$15.97M. 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? Since BKV is loss-making right now, it’s crucial to evaluate the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. Nevertheless, I know these factors are very high-level, so I recommend you dig deeper yourself into BKV here.
Does BKV generate an acceptable amount of cash through operations?
Over the past year, BKV has reduced its debt from CN¥135.00M to CN¥113.00M made up of predominantly near term debt. With this debt payback, BKV’s cash and short-term investments stands at CN¥190.21M , ready to deploy into the business. Moving onto cash from operations, 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 take a look at some of BKV’s operating efficiency ratios such as ROA here.
Can BKV meet its short-term obligations with the cash in hand?
Looking at BKV’s most recent CN¥325.82M liabilities, the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 3.23x. Though, a ratio greater than 3x may be considered as too high, as BKV could be holding too much capital in a low-return investment environment.
Can BKV service its debt comfortably?
BKV’s level of debt is low relative to its total equity, at 9.00%. This range is considered safe as BKV is not taking on too much debt obligation, which can be restrictive and risky for equity-holders. Investors’ risk associated with debt is virtually non-existent with BKV, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Next Steps:
BKV’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 proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how BKV has been performing in the past. You should continue to research Dukang Distillers Holdings to get a more holistic view of the stock by looking at:
Valuation: What is BKV 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 BKV is currently mispriced by the market.
Historical Performance: What has BKV’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
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.
