Yahoo Finance What Investors Should Know About CK Infrastructure Holdings Limited’s (HKG:1038) Financial Strength
Investors pursuing a solid, dependable stock investment can often be led to CK Infrastructure Holdings Limited (SEHK:1038), a large-cap worth HK$156.92B. Risk-averse investors who are attracted to diversified streams of revenue and strong capital returns tend to seek out these large companies. However, its financial health remains the key to continued success. This article will examine CK Infrastructure Holdings’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Note that this information is centred entirely on financial health and is a high-level overview, so I encourage you to look further into 1038 here. See our latest analysis for CK Infrastructure Holdings
Does 1038 produce enough cash relative to debt?
1038 has built up its total debt levels in the last twelve months, from HK$26.81B to HK$49.74B – this includes both the current and long-term debt. With this increase in debt, 1038’s cash and short-term investments stands at HK$9.78B for investing into the business. On top of this, 1038 has produced HK$2.97B in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 5.97%, meaning that 1038’s current level of operating cash is not high enough to cover debt. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In 1038’s case, it is able to generate 0.06x cash from its debt capital.
Can 1038 pay its short-term liabilities?
At the current liabilities level of HK$15.67B liabilities, the company is not able to meet these obligations given the level of current assets of HK$10.76B, with a current ratio of 0.69x below the prudent level of 3x.
Can 1038 service its debt comfortably?
With debt reaching 48.06% of equity, 1038 may be thought of as relatively highly levered. This is common amongst large-cap companies because debt can often be a less expensive alternative to equity due to tax deductibility of interest payments. Since large-caps are seen as safer than their smaller constituents, they tend to enjoy lower cost of capital. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. For 1038, the ratio of 3.74x suggests that interest is well-covered. It is considered a responsible and reassuring practice to maintain high interest coverage, which makes 1038 and other large-cap investments thought to be safe.
Next Steps:
1038’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. Furthermore, its low liquidity raises concerns over whether current asset management practices are properly implemented for the large-cap. This is only a rough assessment of financial health, and I’m sure 1038 has company-specific issues impacting its capital structure decisions. I suggest you continue to research CK Infrastructure Holdings to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 1038’s future growth? Take a look at our free research report of analyst consensus for 1038’s outlook.
Valuation: What is 1038 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 1038 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.
