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Investors looking for stocks with high market liquidity and little debt on the balance sheet should consider CK Asset Holdings Limited (HKG:1113). With a market valuation of HK$220b, 1113 is a safe haven in times of market uncertainty due to its strong balance sheet. These firms won’t be left high and dry if liquidity dries up, and they will be relatively unaffected by rises in interest rates. Today I will analyse the latest financial data for 1113 to determine is solvency and liquidity and whether the stock is a sound investment.
1113’s Debt (And Cash Flows)
1113 has sustained its debt level by about HK$70b over the last 12 months including long-term debt. At this stable level of debt, 1113 currently has HK$55b remaining in cash and short-term investments to keep the business going. Moreover, 1113 has generated HK$14b in operating cash flow over the same time period, resulting in an operating cash to total debt ratio of 20%, signalling that 1113’s debt is appropriately covered by operating cash.
Can 1113 meet its short-term obligations with the cash in hand?
With current liabilities at HK$54b, the company has been able to meet these commitments with a current assets level of HK$221b, leading to a 4.06x current account ratio. The current ratio is the number you get when you divide current assets by current liabilities. However, many consider a ratio above 3x to be high, although this is not necessarily a bad thing.
Does 1113 face the risk of succumbing to its debt-load?
1113’s level of debt is appropriate relative to its total equity, at 20%. This range is considered safe as 1113 is not taking on too much debt obligation, which may be constraining for future growth.
1113’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, the company exhibits an ability to meet its near-term obligations, which isn't a big surprise for a large-cap. I admit this is a fairly basic analysis for 1113's financial health. Other important fundamentals need to be considered alongside. I recommend you continue to research CK Asset Holdings to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 1113’s future growth? Take a look at our free research report of analyst consensus for 1113’s outlook.
- Valuation: What is 1113 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 1113 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.