Yahoo Finance Is Hotel Grand Central Limited’s (SGX:H18) Balance Sheet Strong Enough To Weather A Storm?
While small-cap stocks, such as Hotel Grand Central Limited (SGX:H18) with its market cap of S$966.44m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Assessing first and foremost the financial health is crucial, 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. However, given that I have not delve into the company-specifics, I suggest you dig deeper yourself into H18 here.
How much cash does H18 generate through its operations?
Over the past year, H18 has reduced its debt from S$146.04m to S$100.73m – this includes both the current and long-term debt. With this debt repayment, the current cash and short-term investment levels stands at S$261.20m for investing into the business. Moreover, H18 has produced S$41.79m in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 41.48%, indicating that H18’s operating cash is sufficient to cover its debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In H18’s case, it is able to generate 0.41x cash from its debt capital.
Does H18’s liquid assets cover its short-term commitments?
With current liabilities at S$80.12m, the company has been able to meet these commitments with a current assets level of S$274.39m, leading to a 3.42x current account ratio. However, anything above 3x is considered high and could mean that H18 has too much idle capital in low-earning investments.
Does H18 face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 4.88%, H18’s debt level is relatively low. This range is considered safe as H18 is not taking on too much debt obligation, which may be constraining for future growth.
Next Steps:
H18 has demonstrated its ability to generate sufficient levels of cash flow, while its debt hovers at a safe level. Furthermore, the company exhibits an ability to meet its near term obligations should an adverse event occur. Keep in mind I haven’t considered other factors such as how H18 has been performing in the past. You should continue to research Hotel Grand Central to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for H18’s future growth? Take a look at our free research report of analyst consensus for H18’s outlook.
Valuation: What is H18 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 H18 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.
