【baddies caribbean free online frenemies and allies】Stream Ideas Group Limited (HKG:8401): Time For A Financial Health Check

Stream Ideas Group Limited (

HKG:8401

),baddies caribbean free online frenemies and allies which has zero-debt on its balance sheet, can maximize capital returns by increasing debt due to its lower cost of capital. However, the trade-off is 8401 will have to follow strict debt obligations which will reduce its financial flexibility. While 8401 has no debt on its balance sheet, it doesn’t necessarily mean it exhibits financial strength. I will take you through a few basic checks to assess the financial health of companies with no debt.

See our latest analysis for Stream Ideas Group

Is 8401 right in choosing financial flexibility over lower cost of capital?

Debt funding can be cheaper than issuing new equity due to lower interest cost on debt. However, the trade-off is debtholders’ higher claim on company assets in the event of liquidation and stringent obligations around capital management. The lack of debt on 8401’s balance sheet may be because it does not have access to cheap capital, or it may believe this trade-off is not worth it. Choosing financial flexibility over capital returns make sense if 8401 is a high-growth company. 8401’s revenue growth over the past year is a single-digit 2.8% which is relatively low for a small-cap company. More capital can help the business grow faster. If 8401 is not expecting exceptional future growth, then the decision to avoid may cost shareholders in the long term.

SEHK:8401 Historical Debt January 3rd 19

Can 8401 meet its short-term obligations with the cash in hand?

Given zero long-term debt on its balance sheet, Stream Ideas Group has no solvency issues, which is used to describe the company’s ability to meet its long-term obligations. But another important aspect of financial health is liquidity: the company’s ability to meet short-term obligations, including payments to suppliers and employees. At the current liabilities level of HK$9.1m, it appears that the company has been able to meet these obligations given the level of current assets of HK$67m, with a current ratio of 7.32x. However, a ratio above 3x may be considered excessive by some investors.

Next Steps:

8401 is a fast-growing firm, which supports having have zero-debt and financial freedom to continue to ramp up growth. This may mean this is an optimal capital structure for the business, given that it is also meeting its short-term commitment. Moving forward, its financial position may change. I admit this is a fairly basic analysis for 8401’s financial health. Other important fundamentals need to be considered alongside. You should continue to research Stream Ideas Group to get a more holistic view of the stock by looking at:

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Historical Performance

: What has 8401’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.

Other High-Performing Stocks

: Are there other stocks that provide better prospects with proven track records? Explore our

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To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at

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