Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Sembcorp Industries Ltd (SGX:U96) makes use of debt. But should shareholders be worried about its use of debt?
When Is Debt A Problem?
Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.
View our latest analysis for Sembcorp Industries
What Is Sembcorp Industries's Net Debt?
You can click the graphic below for the historical numbers, but it shows that as of June 2022 Sembcorp Industries had S$8.67b of debt, an increase on S$7.72b, over one year. However, it also had S$1.66b in cash, and so its net debt is S$7.01b.
SGX:U96 Debt to Equity History September 9th 2022
A Look At Sembcorp Industries' Liabilities
Zooming in on the latest balance sheet data, we can see that Sembcorp Industries had liabilities of S$3.67b due within 12 months and liabilities of S$8.70b due beyond that. On the other hand, it had cash of S$1.66b and S$2.58b worth of receivables due within a year. So it has liabilities totalling S$8.14b more than its cash and near-term receivables, combined.
When you consider that this deficiency exceeds the company's S$6.00b market capitalization, you might well be inclined to review the balance sheet intently. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution.
We measure a company's debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.
Sembcorp Industries's debt is 4.9 times its EBITDA, and its EBIT cover its interest expense 2.7 times over. Taken together this implies that, while we wouldn't want to see debt levels rise, we think it can handle its current leverage. On the other hand, Sembcorp Industries grew its EBIT by 26% in the last year. If sustained, this growth should make that debt evaporate like a scarce drinking water during an unnaturally hot summer. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Sembcorp Industries can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.
Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. So we always check how much of that EBIT is translated into free cash flow. Looking at the most recent three years, Sembcorp Industries recorded free cash flow of 49% of its EBIT, which is weaker than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.
Our View
To be frank both Sembcorp Industries's net debt to EBITDA and its track record of staying on top of its total liabilities make us rather uncomfortable with its debt levels. But at least it's pretty decent at growing its EBIT; that's encouraging. It's also worth noting that Sembcorp Industries is in the Integrated Utilities industry, which is often considered to be quite defensive. Looking at the balance sheet and taking into account all these factors, we do believe that debt is making Sembcorp Industries stock a bit risky. That's not necessarily a bad thing, but we'd generally feel more comfortable with less leverage. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. To that end, you should learn about the 3 warning signs we've spotted with Sembcorp Industries (including 2 which are a bit unpleasant) .
If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
巴菲特(Warren Buffett)曾说过一句名言:波动性远非风险的代名词。因此,当你考虑到任何一只股票的风险有多大时,你需要考虑债务可能是显而易见的,因为太多的债务可能会让一家公司倒闭。与许多其他公司一样胜科实业有限公司(新加坡证券交易所股票代码:U96)利用债务。但股东是否应该担心它的债务使用情况?
什么时候债务是个问题?
债务是帮助企业发展的一种工具,但如果一家企业无法偿还贷款人的债务,那么它就只能听从贷款人的摆布。最终,如果公司不能履行其偿还债务的法定义务,股东可能会一无所有地离开。尽管这并不常见,但我们确实经常看到负债累累的公司永久性地稀释股东的权益,因为贷款人迫使他们以令人沮丧的价格筹集资金。当然,债务的好处是,它往往代表着廉价资本,特别是当它用能够以高回报率进行再投资的能力取代公司的稀释时。在考虑一家公司的债务水平时,第一步是同时考虑其现金和债务。
查看我们对Sembcorp Industries的最新分析
胜科工业的净债务是多少?
你可以点击下图查看历史数据,但它显示,截至2022年6月,Sembcorp Industries的债务为86.7亿新元,比一年前增加了77.2亿新元。然而,它也有16.6亿新元的现金,因此其净债务为70.1亿新元。
新交所:U96债转股历史2022年9月9日
胜科实业负债情况一瞥
放大最新的资产负债表数据,我们可以看到Sembcorp Industries有36.7亿新元的负债在12个月内到期,还有87亿新元的负债在12个月内到期。另一方面,该公司有16.6亿新元的现金和价值25.8亿新元的应收账款在一年内到期。因此,它的负债总额比现金和近期应收账款加起来还要多81.4亿新元。
当你考虑到这一不足超过了该公司6亿新元的市值时,你很可能倾向于专心审查资产负债表。在该公司不得不迅速清理其资产负债表的情况下,股东似乎可能会遭受广泛的稀释。
我们通过查看公司的净债务除以利息、税项、折旧和摊销前收益(EBITDA),并计算其息税前收益(EBIT)覆盖利息支出(利息覆盖)的容易程度,来衡量公司的债务负担与其盈利能力的关系。因此,我们考虑债务相对于收益,包括折旧和摊销费用。
Sembcorp Industries的债务是其EBITDA的4.9倍,其EBIT覆盖了2.7倍以上的利息支出。综上所述,这意味着,尽管我们不希望看到债务水平上升,但我们认为它可以处理好目前的杠杆。另一方面,胜科工业去年的息税前利润增长了26%。如果持续下去,这种增长应该会让这笔债务像在异常炎热的夏天里稀缺的饮用水一样蒸发。当你分析债务时,资产负债表显然是你关注的领域。但最终,该业务未来的盈利能力将决定Sembcorp Industries能否随着时间的推移加强其资产负债表。所以,如果你关注未来,你可以看看这个免费显示分析师利润预测的报告。
最后,尽管税务人员可能喜欢会计利润,但贷款人只接受冷硬现金。因此,我们总是检查EBIT中有多少转化为自由现金流。看看最近三年,Sembcorp Industries的自由现金流占其息税前利润的49%,这比我们预期的要弱。这种疲软的现金转换增加了处理债务的难度。
我们的观点
坦率地说,Sembcorp Industries的净债务与EBITDA之比,以及其一直保持在总负债之上的记录,都让我们对其债务水平感到相当不安。但至少它在息税前利润增长方面相当不错;这是令人鼓舞的。同样值得注意的是,Sembcorp Industries属于综合公用事业行业,该行业通常被认为是防御性很强的行业。看看资产负债表,并考虑到所有这些因素,我们确实认为债务让Sembcorp Industries的股票有点风险。这并不一定是一件坏事,但我们通常会在杠杆较少的情况下感到更舒服。当你分析债务时,资产负债表显然是你关注的领域。然而,并非所有投资风险都存在于资产负债表中--远非如此。为此,您应该了解3个警示标志我们已经发现了Sembcorp Industries(包括两家有点令人不快的公司)。
如果你有兴趣投资于可以在没有债务负担的情况下增长利润的企业,那么看看这个免费资产负债表上有净现金的成长型企业名单。
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本文由Simply Wall St.撰写,具有概括性。我们仅使用不偏不倚的方法提供基于历史数据和分析师预测的评论,我们的文章并不打算作为财务建议。它不构成买卖任何股票的建议,也没有考虑你的目标或你的财务状况。我们的目标是为您带来由基本面数据驱动的长期重点分析。请注意,我们的分析可能不会将最新的对价格敏感的公司公告或定性材料考虑在内。Simply Wall St.对上述任何一只股票都没有持仓。