Looking at balance sheets

It’s getting weird all over. Canada just announced that it was closing its borders to all except Canadians, permanent residents and Americans (as an American, this seems like a bad idea for Canada). And Canadians can’t get on a flight to Canada if they have symptoms. The EU is doing something similar.

In Vietnam, there are 61 cases, mostly Europeans or people coming from Europe. Schools still shut down.

I don’t know what will happen, but it does seem like cash flows are going to be an issue globally. Maybe with China going back to work, we could see more exports there, but it seems like the slowdown will continue.

I wanted to start looking at companies and see how well-equipped they are to ride out the downturn. For Vietnam, I decided to start with the bigger companies (by market cap) and look at a few metrics.

I took a dozen companies and put together a comp table with some interesting stats. I didn’t include banks in this, although I do have some data on banks.

My quick conclusion is that these bigger companies were pretty well-situated at the end of 2019.

Metrics based on 2019 YE figures (for BS items) and 2019 IS figures for sales and earnings. Source; Vietstock.com, Vietecon.com

Key takeaways:

• Overall valuation metrics aren’t that high (these are trailing figures) but they also aren’t that cheap. VIC skews it a bit - excluding the stock, P/E comes down to 12.6x. The median P/E is only 11.1x. Of course this is after the massive declines we have seen.

• Debt-to-equity is 58.9% on average (the median is similar at 58.6%). Novaland (NVL) looks the worst out of this, although its interest coverage ratio isn’t too bad. And liabilities to assets is high, but not crazy.

• The current ratio is 1.8x (better if it is higher), but the median is actually 1.2, because it really varies a lot. MSN and VRE look the worst on this. It’s basically a measure of how easily you can fund your shortest-dated liabilities using just your short-term assets.

• Interest coverage is around 38x on average, but the median is more important here at 11x. And there are some that are much lower at 3-5x.

Source: Vietecon.com

I did a little exercise where I ranked everyone from 1-12 for each of these metrics, with 1 being the best and 12 being the worst. I then added up all these rankings to get a total number - with the lowest score possible 4, and the highest 48. It is pretty clear that two of these (GAS and SAB) are very well situated, helped by having very little debt.

On the other hand, MWG, NVL and VIC are riskier, with higher debt levels. MSN has a high score, but its debt is lower (58%) and interest coverage is almost 5x.

Specifically on VIC, it was spending a lot to build up its new businesses, and it has stopped that. It sold Vincommerce to Masan and closed Vinpro. It has some good recurring cash flows businesses that should be able to help support it like Vincom, but it also has resorts that have been shuttered. So it is going to be messy if Vietnam remains shut down.

More on balance sheets and such tomorrow. Stay healthy!