Digital wrote at CNA forum: OK, lets look at the latest balance sheet of Hock Lian Seng. It has zero borrowings. That is good. But in running a business, besides borrowing, you have to have cash to repay current liabilities and non-current liabilties. It can utilise cash on the balance sheet, operating cashflow in the normal running of the business, borrowing from bank, credit facilities, etc to do this. While its current assets is S$192,675,000, of which S$156,239,000 is in the form of cash, its current liabilities is S$125,454,000. I shall not include the non-current liabilities as it is neglible and it is not an immediate concern. The company has 509,978,991 shares. Using my formula, the cash excluding current liabilities per share should be (156,239,000 - 125,454,000)/509,978,991 = S$0.06 = 6 cents per share. This is a more accurate measure of the amount of sparecash per share a company has on its balance sheet after the liabilities(in this case I have only considered the current liabilities as the non-current liabilities are negible)has been repaid.
Finally someone who speaks some logic haha. I cant believe that institutions are harping on the fact that the firm is trading below net cash. Construction firms are cash rich for a reason: they receive advance payments. This is recognized under $65.812mil of progress billing in excess of WIP. To adjust for it.. Cash of $156.239mil - 65.812mil = $90.427mil. This is to take out the cash received for work not fulfilled yet but cash recorded on their books. Next we add back approximate profits for the projects. Assuming we are very optimistic, gross margin is 7-15%. At 15%, profits from $65.812 mil of revenue will be $9.8718 mil. Adding both we will get $100.298 net cash Over 510 mil of shares, thats $0.19 per share. This is far from the supposed below net cash. I think institutions should look carefully instead of making such sweeping statements and practice mechanical screening for stocks without careful research.
