What does Boill Healthcare Holdings Limited’s (HKG:1246) Balance Sheet Tell Us About Its Future?

Investors are always looking for growth in small-cap stocks like Boill Healthcare Holdings Limited (HKG:1246), with a market cap of HK$771.29m. However, an important fact which most ignore is: how financially healthy is the business? Since 1246 is loss-making right now, it’s vital to understand the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. However, since I only look at basic financial figures, I recommend you dig deeper yourself into 1246 here.

How does 1246’s operating cash flow stack up against its debt?

1246 has built up its total debt levels in the last twelve months, from HK$851.77m to HK$1.22b , which is made up of current and long term debt. With this rise in debt, 1246’s cash and short-term investments stands at HK$225.33m for investing into the business. Moving onto cash from operations, its operating cash flow is not yet significant enough to calculate a meaningful cash-to-debt ratio, indicating that operational efficiency is something we’d need to take a look at. As the purpose of this article is a high-level overview, I won’t be looking at this today, but you can take a look at some of 1246’s operating efficiency ratios such as ROA here.

Can 1246 pay its short-term liabilities?

With current liabilities at HK$1.15b, it appears that the company has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.81x, which is below the prudent industry ratio of 3x.

SEHK:1246 Historical Debt July 18th 18
SEHK:1246 Historical Debt July 18th 18

Does 1246 face the risk of succumbing to its debt-load?

With debt reaching 78.49% of equity, 1246 may be thought of as relatively highly levered. This is not unusual for small-caps as debt tends to be a cheaper and faster source of funding for some businesses. However, since 1246 is presently loss-making, sustainability of its current state of operations becomes a concern. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.

Next Steps:

1246’s cash flow coverage indicates it could improve its operating efficiency in order to meet demand for debt repayments should unforeseen events arise. Furthermore, its low liquidity raises concerns over whether current asset management practices are properly implemented for the small-cap. I admit this is a fairly basic analysis for 1246’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Boill Healthcare Holdings to get a more holistic view of the stock by looking at:

  1. Valuation: What is 1246 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 1246 is currently mispriced by the market.
  2. Historical Performance: What has 1246’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.