The company’s decision to essentially kill its own business raises an interesting question that many investors likely would want answers to: Which oil & gas company may be next to fall?
It’s hard to say. After all, Swiber’s decision caught many by surprise, me included. But it’s also worth noting that shareholders of a company can get hurt badly even if it does not go bankrupt or has to wind itself down. So, it’s still worth thinking about the companies with very shaky finances.
I decided to run a screen on the oil & gas stocks in Singapore to find stocks that meet the following two criteria:
1) A net-debt to equity ratio of over 100% (where net-debt refers to total debt minus cash and short-term investments)
2) A negative operating cash flow over the last 12 months.
Companies that show up in my screen would be those that have a really weak balance sheet as well as an inability to generate cash. In a challenging business environment (which is an understatement for the situation that oil & gas companies are finding themselves in), these two characteristics can be a really toxic combination.
I can’t tell for sure how many oil & gas stocks there are in Singapore’s stock market right now, but I do know there were 54 of them as of November 2014. So, these 54 will constitute my universe of Singapore’s oil & gas stocks. Here are the identities of the companies out of the group of 54 that have both the traits I specified earlier:
- Cosco Corporation (Singapore) Limited (SGX: F83)
- KS Energy Services Limited (SGX: 578)
- Ezra Holdings Limited (SGX: 5DN)
- AusGroup Ltd (SGX: 5GJ)
- Pacific Radiance Ltd (SGX: T8V)
- Nam Cheong Ltd (SGX: N4E)
You can see their finances in the table below:
Source: S&P Global Market Intelligence
Now, the six shares mentioned above are not guaranteed to be poor investments going forward. Nor are their businesses definitely heading for trouble. But, their weak finances places their businesses at great risk in the current environment – and that’s something for investors to keep in mind.
For more investing analyses and important updates about the stock market, sign up to The Motley Fool Singapore's free weekly investing newsletter, Take Stock Singapore. Written by David Kuo, it can help you grow your wealth in the years ahead.
Like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn't own shares in any company mentioned.