Watch out for Debt-to-Equity Ratio of companies

We hear of news of companies were defaulting on their borrowings in recent times. This can affect share prices.

To protect from this happening, it is advisable to know the Debt-to-Equity (D/E) ratios of companies. It makes sense to go for companies with lower debts where debt servicing does not seriously impact the company.

Information for the table was extracted from SGX’s StockFacts. D/E (in %) is total debts divided by equity. (Reits are not subjects of this post.)

Two periods were compared, December 2015 against July 2016.

Counter D/E % Dec 2015 D/E % July 2016
SembCorp Marine 90.0 141.0
SembCorp Ind 74.9 103.7
SBS Transit 158.3 102.9
M1 95.2 63.3
CapitaLand 66.9 62.5
City Development 56.6 49.8
Keppel Corp 66.8 45.0
Singtel 44.0 33.1
UOL 34.3 30.4
SPH 29.9 29.9
SingPost 16.3 16.2
ComfortDelgro 25.9 16.2
SIA 10.7 10.3
SATS 7.1 6.9
SIA Engr 2.6 2.2

The next table shows the highest Debt-to-Equity ratios (top 8).

Counter D/E % July 2016
Oxley Holdings 348.8
Aspial Corp 208.9
GSH Corp 193.0
Select Group 190.1
Maxi-Cash 184.6
Neo Group 183.1
Money Max 161.4
Sing Holdings 146.1

Note: Debt financing is a complex matter and it cannot be simplified into just a number. At the end, it is about whether the business can fulfill its debt obligations and improve the business operations.

Disclaimer: The author disclaimed liabilities on use of this post by readers for investment decisions. Use them with caution.

Copyright © 2016, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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2 Responses to Watch out for Debt-to-Equity Ratio of companies

  1. Eric Teh says:

    Dear Mr. Lim,
    I looked up Stockfacts on SBS Transit and found the D/E ratio on 31 Dec 2015 to be 99.6%.
    (http://www.sgx.com/wps/portal/sgxweb/home/company_disclosure/stockfacts?page=2&code=S61&lang=en-us)
    Wondering why the figure is so different from what you’ve got.

    Kind rgds,
    Eric

    • limkimtong says:

      The figure for 31 Dec 2015 is as per your discovery. This is half-way into 2016, the ratio wold have changed with the latest financial statements. I extracted the D/E ratio using the FIRST screen of StockFacts with the selection criteria. Check this out by selecting D/E ratio as your search field. Regards.

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