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The size of Guangdong Investment Limited (SEHK:270), a HK$82.12B large-cap, often attracts investors seeking a reliable investment in the stock market. Big corporations are much sought after by risk-averse investors who find diversified revenue streams and strong capital returns attractive. However, its financial health remains the key to continued success. Today we will look at Guangdong Investment’s financial liquidity and debt levels, which are strong indicators for whether the company can weather economic downturns or fund strategic acquisitions for future growth. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into 270 here. View our latest analysis for Guangdong Investment
Does 270 produce enough cash relative to debt?
Over the past year, 270 has maintained its debt levels at around HK$6.89B comprising of short- and long-term debt. At this constant level of debt, 270 currently has HK$15.66B remaining in cash and short-term investments , ready to deploy 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. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can assess some of 270’s operating efficiency ratios such as ROA here.
Can 270 pay its short-term liabilities?
At the current liabilities level of HK$10.99B liabilities, the company has been able to meet these commitments with a current assets level of HK$23.38B, leading to a 2.13x current account ratio. For Water Utilities companies, this ratio is within a sensible range as there’s enough of a cash buffer without holding too capital in low return investments.
Does 270 face the risk of succumbing to its debt-load?
With a debt-to-equity ratio of 14.01%, 270’s debt level may be seen as prudent. 270 is not taking on too much debt commitment, which may be constraining for future growth.
Next Steps:
270’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. However, the company exhibits proper management of current assets and upcoming liabilities. This is only a rough assessment of financial health, and I’m sure 270 has company-specific issues impacting its capital structure decisions. You should continue to research Guangdong Investment to get a better picture of the stock by looking at: