Small and large cap stocks are widely popular for a variety of reasons, however, mid-cap companies such as Landing International Development Limited (SEHK:582), with a market cap of HK$47.90B, often get neglected by retail investors. However, generally ignored mid-caps have historically delivered better risk-adjusted returns than the two other categories of stocks. 582’s financial liquidity and debt position will be analysed in this article, to get an idea of whether the company can fund opportunities for strategic growth and maintain strength through economic downturns. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into 582 here. View our latest analysis for Landing International Development

How does 582’s operating cash flow stack up against its debt?

582 has built up its total debt levels in the last twelve months, from HK$1.80B to HK$1.98B , which is made up of current and long term debt. With this increase in debt, 582’s cash and short-term investments stands at HK$4.66B , 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. For this article’s sake, I won’t be looking at this today, but you can examine some of 582’s operating efficiency ratios such as ROA here.

Can 582 meet its short-term obligations with the cash in hand?

With current liabilities at HK$1.02B, it seems that the business has been able to meet these commitments with a current assets level of HK$6.83B, leading to a 6.67x current account ratio. However, a ratio greater than 3x may be considered as too high, as 582 could be holding too much capital in a low-return investment environment.

Can 582 service its debt comfortably?

With debt at 12.28% of equity, 582 may be thought of as appropriately levered. 582 is not taking on too much debt commitment, which can be restrictive and risky for equity-holders. Risk around debt is very low for 582, and the company also has the ability and headroom to increase debt if needed going forward.

Next Steps:

582’s low debt is also met with low coverage. This indicates room for improvement as its cash flow covers less than a quarter of its borrowings, which means its operating efficiency could be better. However, the company exhibits an ability to meet its near term obligations should an adverse event occur. I admit this is a fairly basic analysis for 582’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Landing International Development to get a better picture of the stock by looking at: