In This Article:
Investors are always looking for growth in small-cap stocks like BH Global Corporation Limited (SGX:BQN), with a market cap of S$13.20M. However, an important fact which most ignore is: how financially healthy is the business? Given that BQN is not presently profitable, it’s essential 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. Though, I know these factors are very high-level, so I suggest you dig deeper yourself into BQN here.
Does BQN generate enough cash through operations?
BQN’s debt level has been constant at around S$14.39M over the previous year – this includes both the current and long-term debt. At this current level of debt, BQN currently has S$7.22M remaining in cash and short-term investments for investing into the business. Moreover, BQN has generated S$655.00K in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 4.55%, indicating that BQN’s current level of operating cash is not high enough to cover debt. This ratio can also be a sign of operational efficiency for loss making businesses as traditional metrics such as return on asset (ROA) requires a positive net income. In BQN’s case, it is able to generate 0.046x cash from its debt capital.
Can BQN meet its short-term obligations with the cash in hand?
At the current liabilities level of S$38.65M liabilities, it seems that the business has been able to meet these obligations given the level of current assets of S$48.77M, with a current ratio of 1.26x. For Electrical companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Can BQN service its debt comfortably?
With debt reaching 51.21% of equity, BQN may be thought of as relatively highly levered. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. Though, since BQN is currently loss-making, sustainability of its current state of operations becomes a concern. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.
Next Steps:
BQN’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. However, the company exhibits proper management of current assets and upcoming liabilities. Keep in mind I haven’t considered other factors such as how BQN has been performing in the past. I recommend you continue to research BH Global to get a more holistic view of the stock by looking at: