Monday, January 05, 2009

Cash Rich Companies

In such turbulent times, you would want to work for a cash rich company. There are still a lot of cash residing in many listed companies. Below are the companies within the top 100 biggest market cap with the most net cash:

1) Berkshire Hathaway $106bn
2) Bank of China $100.6bn
3) Industrial & Comm Bank of China $89bn
4) China Construction Bank $81.5bn
5) ExxonMobil $28.2bn
6) Apple $24.5bn
7) Cisco Systems $19.9bn
8) Microsoft $18.7bn
9) Google $14.4bn
10) Nintendo $11bn
11) Roche $9.9bn
12) Intel $9.8bn
13) Pfizer $9.7bn
14) Qualcomm $6.4bn
15) CNOOC $6.1bn
16) Visa $5.2bn
17) China Life $4.3bn
18) Nokia $4.1bn
19) Chevron $4bn
20) Genentech $2.9bn
21) Wyeth $2.7bn
22) Statoil Hydro $2.2bn
23) Oracle $1.8bn
24) Axa $1.7bn
25) Bristol Myers Squibb $1.2bn

Out of the top 100 biggest companies in the world, only 29 are in a net cash position. Cash within a company won't be valued at a premium if the company is perceived to be just sitting on it. Cash per share valuation will only be relevant if its a good M&A candidate, thus ruling out most China companies. Cash basically only creates a buffer for NTA valuation, which is good if you are breaking up the company or selling the company, or distributing them as dividends.

Many of the companies use their cash as investing/ corp acquisition strategy: Berkshire Hathaway, the bulk of tech companies and also drug companies - they will acquire strategic stakes to protect their turf or to fuel growth via acquisition.

Companies that uses cash to buyback shares might as well give back as dividends. I am always against share buybacks. Taking them private usually will not happen as the size is too big. Actually if KKR and TPG were to pool their resources together, in a bull market setting, they can very well take some of them private... but certainly not in current market conditions.

Locally, there are very sizable cash rich companies, but to compare on absolute basis is a bit one dimensional. A better measure would be to take the cash per share and divide it as a percentage of market price. All in RM.

Net Cash / Paid up / Cash Per Share / % of Mkt Price
MAS 4.4bn / 1.25bn / 3.52 / 109%
-admirable considering that the company has had to deal with very high jet fuel prices over the past few years, as long as Jala is at the helm, MAS can be a core long term holding
Resorts 4.15bn / 5.68bn / 0.73 / 30%
Genting 2.16bn / 3.69bn / 0.58 / 14.8%
- the cost overruns at Sentosa and slumping revenue at overseas subsidiaries may stretch demand on its cash hoard, share buybacks will have to take a backseat, cautious on both stocks
PetGas 1.53bn / 1.978bn / 0.77 / 7.8%
Sime Darby 1.16bn / 5.997bn / 0.19 / 3.2%
- very low cash position for the world' biggest plantation company, simmering problems with integration of other big plantation firms, avoid for now
Proton 1.14bn / 549m / 2.07 / 110%
- solid buy for cash if the company can be sold to a foreign carmaker, cash alone worth more than the stock, i.e. its auto assembly assets are valued at less than zero
Bursa 1bn / 519m / 1.92 / 33%
Malaysia Airports 766m / 1.1bn / 0.69 / 29.8%
UMW 745m / 521m / 1.42 / 26.7%
DIGI 504.8m / 750m / 0.67 / 2.8%
Bintulu Port 488m / 400m / 1.22 / 21.7%
- often ignored but a good, solid, conservative company, core holding
Star Pub 457m / 738m / 0.62 / 19%
YNH 323m / 356.6m / 0.90 / 75.4%
- one of the better managed property companies
Asiatic 279m / 752m / 0.37 / 8.7%
Amway 244m / 164.3m / 1.48 / 21.5%
Carlsberg 222m / 308m / 0.72 / 19.6%
JT 213m / 261.5m / 0.81 / 18%
TH Plant 204.6m / 196m / 1.04 / 77%
- another conservative plantation company, if it can boost its CPO yield, valuations will fly

p/s photo: Yuri Ebihara


solomon said...

I think of relevant is the people who manage the coffers. You can have the highest in cash position now but the next minutes left yourself in minus zero.

A lot of cases already like Prime Utilities. Solf IWK and the monies placed with fund manager in Singapore and cannot take back the fund when required. What have the Authorities have done?

Of the list, I still like Berkshire. Locally, maybe Resorts and Genting.

yok hoong said...


in malaysia, avoid cash rich stocks. before you know it, they will screw you big time with mega sweetheart deals at the expense of the MIs. Wanna look back at YLI. I complained to SC. Best part is that the cash is long gone and all I received todate is an auto reply that they have received my e-mail.
Dont tell me no more about cash rich companies in Malaysia. Oh by the way, Cold Storage saga was even worse coz the company has vanished into thin air after the cash was raided. Guess, its a consolation YLI is still around. You MMC MIs, keep your fingers crossed. You are next.

easystar said...

Hi Salvatore,

I think we need to be more careful with insurance companies net cash as some of those are statutory reserves as well as provision against future losses.

Share buy back - it depends on who/where you are. Some countries taxed double tax dividend (such as UK)( while treat share price gains as capital gain which qualify for very low tax rate. Swiss company also normally do buy back rather than pay dividend due to Switzerland tax regime.

hng said...

Dear Dali

I don't agree YNHprop is in net cash position. In contrast, YNH should have net gearing of 30% according to most analyst and based on its balance sheet. In addition, YNH has been several time delay ink its biggest project in Jalan Sultan Ismail (Menara YNH) since 2007, resulting uncertain company future prospect as YNH heavily rely on Menara YNH to ensure earning visibility.The only comment cited by management was there are modification on building design requested by potential buyer and they are not rush to sell these project and reaffirmed the deal will seal by end of 2008 (already past)!?

There are rumor over viablibity of these project as global financial and property slump. Potential buyer, Kuwait finance may even cancel the project

Ooi Beng Hooi said...

I was surprised to see TH Plant has cash of 196m (RM1.04/share).

Unaudited quarterly financial report (ending Sept 08) showed the cash and cash equivalent surged to 197millions from 39millions as at Dec 07.

However, at the same time, the payable increased from 50millions to 257millions!

Simply looking at the cash in hand alone could be misleading...

Born2Reign said...

I agree with Ong Beng Hooi. Back when I was in charge of audits, I see so many "big" cos with equally
-big liabilities and
-large overdue acct receivables (with more than 20% more than 12 months aging)

Also take into account the statutory reserves that insurance companies provide for their estimated claims.

Large net cash does not mean they are strong going concern.