Advertisement
Singapore markets closed
  • Straits Times Index

    3,224.01
    -27.70 (-0.85%)
     
  • Nikkei

    40,369.44
    +201.37 (+0.50%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Bitcoin USD

    69,724.95
    -900.94 (-1.28%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • Dow

    39,807.37
    +47.29 (+0.12%)
     
  • Nasdaq

    16,379.46
    -20.06 (-0.12%)
     
  • Gold

    2,254.80
    +16.40 (+0.73%)
     
  • Crude Oil

    83.11
    -0.06 (-0.07%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • FTSE Bursa Malaysia

    1,536.07
    +5.47 (+0.36%)
     
  • Jakarta Composite Index

    7,288.81
    -21.28 (-0.29%)
     
  • PSE Index

    6,903.53
    +5.36 (+0.08%)
     

What You Must Know About Kuban Power and Electrification Open Joint Stock Company’s (MCX:KUBE) Financial Strength

Investors are always looking for growth in small-cap stocks like Kuban Power and Electrification Open Joint Stock Company (MISX:KUBE), with a market cap of RUРУБ18.44B. However, an important fact which most ignore is: how financially healthy is the business? 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’d encourage you to dig deeper yourself into KUBE here.

Does KUBE generate an acceptable amount of cash through operations?

KUBE’s debt levels surged from RUРУБ18.99B to RUРУБ22.71B over the last 12 months , which comprises of short- and long-term debt. With this growth in debt, KUBE currently has RUРУБ1.68B remaining in cash and short-term investments for investing into the business. Moreover, KUBE has generated RUРУБ4.67B in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 20.58%, signalling that KUBE’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 KUBE’s case, it is able to generate 0.21x cash from its debt capital.

Can KUBE meet its short-term obligations with the cash in hand?

At the current liabilities level of RUРУБ11.91B liabilities, it seems that the business has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.86x, which is below the prudent industry ratio of 3x.

MISX:KUBE Historical Debt Jun 8th 18
MISX:KUBE Historical Debt Jun 8th 18

Is KUBE’s debt level acceptable?

KUBE is a relatively highly levered company with a debt-to-equity of 79.95%. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. We can check to see whether KUBE 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 KUBE’s, case, the ratio of 2.78x suggests that interest is not strongly covered, which means that debtors may be less inclined to loan the company more money, reducing its headroom for growth through debt.

Next Steps:

KUBE’s debt and cash flow levels indicate room for improvement. Its cash flow coverage of less than a quarter of debt means that operating efficiency could be an issue. In addition to this, its low liquidity raises concerns over whether current asset management practices are properly implemented for the small-cap. I admit this is a fairly basic analysis for KUBE’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Kuban Power and Electrification to get a better picture of the stock by looking at:

ADVERTISEMENT
  1. Historical Performance: What has KUBE’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.

  2. 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.