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Investors pursuing a solid, dependable stock investment can often be led to HKT Trust and HKT Limited (HKG:6823), a large-cap worth HK$80.71b. Market participants who are conscious of risk tend to search for large firms, attracted by the prospect of varied revenue sources and strong returns on capital. But, the key to their continued success lies in its financial health. I will provide an overview of HKT Trust and HKT’s financial liquidity and leverage to give you an idea of HKT Trust and HKT’s position to take advantage of potential acquisitions or comfortably endure future downturns. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into 6823 here.
View our latest analysis for HKT Trust and HKT
How much cash does 6823 generate through its operations?
Over the past year, 6823 has ramped up its debt from HK$38.70b to HK$42.82b , which comprises of short- and long-term debt. With this increase in debt, the current cash and short-term investment levels stands at HK$2.72b , ready to deploy into the business. Additionally, 6823 has produced HK$12.34b in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 28.8%, indicating that 6823’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 6823’s case, it is able to generate 0.29x cash from its debt capital.
Can 6823 pay its short-term liabilities?
At the current liabilities level of HK$19.61b liabilities, the company has not been able to meet these commitments with a current assets level of HK$10.36b, leading to a 0.53x current account ratio. which is under the appropriate industry ratio of 3x.
Can 6823 service its debt comfortably?
With total debt exceeding equities, HKT Trust and HKT is considered a highly levered company. 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. We can test if 6823’s debt levels are sustainable by measuring interest payments against earnings of a company. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. For 6823, the ratio of 6.65x suggests that interest is appropriately covered. It is considered a responsible and reassuring practice to maintain high interest coverage, which makes 6823 and other large-cap investments thought to be safe.