3 companies with Net Cash Level representing more than 60% of market capitalization

Net cash is a financial metric that is reported on a company's financial statements. It is calculated by subtracting a company's total debt load from its total cash and short-term investments.

Similar to Current ratio, net cash is a measurement of a company’s overall liquidity, which is the ability to quickly meet its financial obligations.

With that in mind, we will be looking at 3 companies which have a significant amount of net cash on hand as compared to their market capitalization:

• PEC Limited (SGX: IX2)
• Cordlife Group Limited (SGX: P8A)
• Valuetronics Holdings Limited (SGX: BN2)

1) PEC Limited (SGX: IX2)

Established in 1982, PEC Limited (“PEC”) has rapidly expanded its capabilities and geographic reach to Asia and the Middle East. Today, it provides integrated project and maintenance solutions to the energy, petrochemical, terminal and pharmaceutical industries.

PEC’s core segments are project works and maintenance services, of which the latter offers a steady recurring income stream. The Group is one of the largest providers of maintenance services in Singapore.

The Group has also taken strategic steps to position itself for the world’s transition to a low carbon economy. One of its initiatives is through PEC Process Systems Pte. Ltd, a wholly-owned subsidiary which designs and fabricates modular process and gas compression solutions.

Key Statistics

Net Cash Position

For FY2020, PEC’s net cash position declined by 20% year-on-year to just S$60.15 million, on back of the substantial jump in its total debt load and higher capital expenditure during the period, despite being partially offset by the rise in its total amount of cash and short-term investments.

With the decline in its debt load and improvement to its net cash flow generated from its operating activities, PEC’s net cash position shot up by more than 80% year-on-year to S$110.52 million. On top of that, the decline in its capital expenditure also helped to increase its cash level during the period.

Based on the market capitalization of S$136.23 million, PEC’s net cash position represents 81.12% of its total market capitalization.

2) Cordlife Group Limited (SGX: P8A)

Established in May 2001, Cordlife Group Limited (“Cordlife”) is a leading company dedicated to safeguarding the well-being of mother and child. The Group is listed on the Mainboard of the Singapore Exchange in 2012 and a pioneer in private cord blood banking in Asia.

Cordlife owns the largest network of cord blood banks in Asia with full stem cell banking facilities in six key markets namely Singapore, Hong Kong, Indonesia, India, Malaysia and the Philippines. In Singapore, the Philippines and Indonesia, Cordlife operates the largest private cord blood banks; and is amongst the top three market leaders in India and Malaysia.

Key Statistics

Net Cash Position

For the past few financial years, Cordlife’s net cash position has been on a rising trend, mainly due to the rise in its total cash and short-term investments, while keeping its total debt load to a manageable level.

For its trailing 12-month period, Cordlife’s net cash position grew by 4.57% to S$61.76 million, mainly to the majority repayment of its debts in hand.

Based on the market capitalization of S$95.73 million, Cordlife’s net cash position represents 64.51% of its total market capitalization.

3) Valuetronics Holdings Limited (SGX: BN2)

Valuetronics is an Electronic Manufacturing Service (“EMS”) provider which focuses on the design and development of products. Valuetronics’ core competencies ranging from tool fabrication, injection moulding, metal stamping, machining, surface mount technology (“SMT”) and finished product assembly on full turnkey basis.

Valuetronics’ EMS business is classified into two reportable segments, namely consumer electronics products and industrial and commercial electronics products.

Key Statistics

Net Cash Position

Since FY2018 till FY2020, Valuetronics’ net cash position has been on a rising trend. This can be seen from the increase in its total cash and short-term investments, as a result of strong cash flow generation from its operating activities.

However, this figure in FY2021 suffered a minor 3.22% dip year-on-year to S$193.68 million, underpinned by the increase in its total debt load and the decline in its total cash and short-term investments.

Based on the market capitalization of S$246.12 million, Valuetronics’ net cash position represents 78.69% of its total market capitalization.

Conclusion

To conclude, the 3 companies mentioned above have a significant net cash position to back up their current market capitalization. This proves that there is certain margin of safety with these companies and the strong net cash position shows that they have the financial ability to meet their obligations with ease.

Investors can make use of this metric to sieve out stocks that may be potentially undervalued from the assets viewpoint.

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