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There are a number of reasons that attract investors towards large-cap companies such as Tingyi (Cayman Islands) Holding Corp (SEHK:322), with a market cap of HK$91.44B. Doing business globally, large caps tend to have diversified revenue streams and attractive capital returns, making them desirable investments for risk-averse portfolios. However, the health of the financials determines whether the company continues to succeed. Let’s take a look at Tingyi (Cayman Islands) Holding’s leverage and assess its financial strength to get an idea of their ability to fund strategic acquisitions and grow through cyclical pressures. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into 322 here. Check out our latest analysis for Tingyi (Cayman Islands) Holding
Does 322 produce enough cash relative to debt?
322 has shrunken its total debt levels in the last twelve months, from CN¥16.19B to CN¥14.39B , which is made up of current and long term debt. With this debt payback, 322’s cash and short-term investments stands at CN¥10.23B for investing into the business. Moving onto cash from operations, its small level of operating cash flow means calculating cash-to-debt wouldn’t be too useful, though these low levels of cash means that operational efficiency is worth a look. For this article’s sake, I won’t be looking at this today, but you can assess some of 322’s operating efficiency ratios such as ROA here.
Does 322’s liquid assets cover its short-term commitments?
At the current liabilities level of CN¥23.98B liabilities, it appears that the company has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.79x, which is below the prudent industry ratio of 3x.
Is 322’s debt level acceptable?
322 is a relatively highly levered company with a debt-to-equity of 64.54%. 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 check to see whether 322 is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. In 322’s case, the ratio of 14.97x suggests that interest is comfortably covered. High interest coverage is seen as a responsible and safe practice, which highlights why most investors believe large-caps such as 322 is a safe investment.