Source of article: THE BUSSINESS TIMES

My post on LinkedIn can be seen here.

In summary:

It is par for the course for property players to leverage on their projects through debt financing. This is to facilitate cash flow during the various development stages of their ongoing projects.

Investors should be concerned if a company has substantively more debt than what its assets are collectively worth.

Investors should take note of amber lights (i) if the aggregate value of the company’s assets of the company (as reflected in its balance sheet) are not based on their current market values; and (ii) the cash out-flow of the company exceeds the revenue of the company by more than 50 per cent for more than two consecutive financial quarters.

Lager-cap companies generally have more assets and reserves and can better withstand the vicissitudes of the economic and financial uncertainties of the global environment.

That said, giant-size companies (such as Hyflux) have been brought down to their knees not just by the high gearing per se but a combination of factors such as mis-management, lack of prudence and tardy judgement.

Investors must at all times be vigilant in monitoring the financial reports and announcements of their investee companies, and make their investment decisions based on proper analysis and judgement, and not just navel-gazing at the gearing level of the company in question.

Thank you, Uma, for publishing my quotes in the attached Singapore Business Times story published on 13 February 2024.

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