Companies rated by net cash and net debt positions

A HEALTHY cash position is an important indicator to evaluate whether a company’s financials are sound to withstand any unforeseen shocks.

Cash-rich companies are usually supported by “liquidity buffer”, which allows them to meet their debt obligations easily.

Operational expansion could also be carried out with much ease without the reliance on external financing. As for shareholders, cash-rich entities offer promising dividend payouts without resorting to borrowings.

In Bursa Malaysia, several companies have built strong net cash positions over the years. Data compiled shows that the Genting Group has topped this coveted list, with a whopping net cash position of RM8.8bil as at Dec 31, 2017.

The diversified conglomerate, whose business covers casinos, leisure and entertainment, plantation, power as well as oil and gas, has been expanding over the years, supported by its strong cash position.

Under the Genting integrated tourism plan, its subsidiary Genting Malaysia Bhd has developed and progressively launched new tourism facilities, which are expected to be its long-term growth catalysts.

Last year, the group also announced the development of a long-stalled project by its Resorts World New York City. The US$400mil expansion at the Aqueduct Racetrack in Queens, New York is set to become Genting Group’s long-run growth engine.

Genting’s dividend yield – a measure of how much a company pays out to its shareholders in relation to its share price, has been relatively decent. A check on Bloomberg shows that its 12-month dividend yield stands at 2.19%, with its three-year dividend growth at a whopping 176%.

Second to the Genting Group, integrated petrochemical producer Lotte Chemical Titan Holding Bhd has a net cash of RM3.61bil as at Dec 31, 2017.

On a year-on-year comparison, the company’s net cash position has surged by nearly 274%, largely due to the cash generated from its initial public offering (IPO) in July last year.

The company raised a total of RM4bil from its IPO and has earmarked RM2.8bil to build a new petrochemical facility in Indonesia. As at Sept 30, 2017, nearly 90% of the proceeds remain unused.

Lotte Chemical aims to use its IPO cash within 36 months from its listing, to drive the group’s expansion plan in Asean to improve operations and capacity.

Meanwhile, Oriental Holdings Bhd, which was founded by the late Tan Sri Loh Boon Siew, sits comfortably at the third position in the overall list, just above Petronas Group.

The company is the distributor of Honda vehicles in Malaysia and Singapore.

Oriental’s net cash has grown by 47% year-on-year to RM2.7bil as at Dec 31 last year. Supported by its strong cash position, Oriental allocated a bigger amount for its plantation business’ capital expenditure in 2017.

The bigger allocation is to pursue new planting, construction of office and staff quarters as well as a palm oil mill.

As for the group’s shareholders, the stock offers a decent 12-month dividend yield of 3.08% and has delivered an upside of 42% in dividend growth over the last three years.

Next on the list is the Petronas group, which includes listed entities such as MISC Bhd, Petronas Dagangan Bhd (PetDag) and Petronas Chemicals Group Bhd, among others.

Over the last one year, the group’s net cash position has dropped by 39%, mainly as a result of Petronas Gas Bhd’s (PetGas) net debt position, which has widened the most.

Apart from PetGas, MISC and Bintulu Port Holdings Bhd have also experienced an increase in net debt position in the same period.

PetDag, on the other hand, saw its net cash strengthen significantly following the company’s disposal of stake in three subsidiaries namely Petronas Energy Philippines Inc, Duta Inc and Thang Long LPG Co Ltd.

Surprisingly, low-profile Keck Seng (M) Bhd ranks fifth, with a net cash position of RM1.35bil. On a year-onyear comparison, the net cash has increased significantly by nearly 17%.

The palm oil producer’s dividend distribution has fallen by 1.6% in the last three years, in line with the company’s falling bottom-line. In the first nine months of financial year 2017, Keck Seng’s net profit tumbled by 94% to RM2.24mil as a result of higher manufacturing segment loss.

The company’s 12-month dividend yield stands at 2.04%.

Muhibbah Engineering (M) Bhd stands out among the top Bursa companies in terms of net cash position, as the construction outfit experienced an exponential surge in net cash as at Dec 31 last year.

The company’s net cash position widened by 3679.5% to RM196.38mil within one year.

This is mainly as a result of its shortterm borrowings, which was pared down by nearly 31% year-on-year.

Cahya Mata Sarawak Bhd, which is second after Muhibbah, experienced a growth of 1,096.9% to a net cash position of RM161.09mil.

The sudden jump in net cash is primarily because of the proceeds from the company’s RM500mil Islamic medium term notes.

The five-year notes, marks Cahya Mata’s first sukuk issuance.

Meanwhile, Fraser and Neave Holdings Bhd (F&N) saw the biggest loss in net cash, according to the data compiled by StarBizWeek.

Its position declined by 76% year-onyear to RM45.34mil, despite halving its long-term borrowings in the same period.

The significant narrowing of its net cash position was due to the company’s lower cash and short-term deposits as at Dec 31, 2017.

Next to F&N, Top Glove Corp Bhd’s net cash also fell by 69% to RM80.43mil, with one of the reasons being asset acquisition.