Thirty-one firms in billion-ringgit league


BY P.W. THONG

Thirty-one publicly listed companies in the country are in the billion-ringgit league in terms of having cash and cash equivalent. And topping the list is Malayan Banking Bhd (Maybank) with RM29.5bil. 

Indeed, nine of the 10 most cash-rich companies on Bursa Malaysia are either banks or financial institutional groups, the exception being conglomerate YTL Corp Bhd, which is ranked 9th. 

YTL has nearly RM6.4bil in cash reserves in its consolidated accounts, with the bulk – RM4.4bil – coming from independent power producer unit YTL Power International Bhd

Other notable names in the top 50 include such giants as Telekom Malaysia Bhd (RM4.19bil cash), Genting Bhd (RM4.17bil), Proton Holdings Bhd (RM2.56bil), Malaysia Airlines (RM2.19bil), Malaysia International Shipping Corp Bhd (RM1.85bil), Maxis Communications Bhd (RM1.45bil) and Tenaga Nasional Bhd (RM1.25bil). 

Some mid-sized companies have also made it into the top-50 list, among them Malakoff Bhd (RM3.32bil), TIME Dotcom Bhd (RM682.4mil) and Pos Malaysia & Services Holdings Bhd (RM668.7mil). The list also featured some cash-rich shell companies such as Naluri Bhd (RM1.13bil) and Pacificmas Bhd (RM490.4mil). 

Surprisingly, some well-known names did not make the list, among them Digi.com Bhd (RM411.2mil cash), British American Tobacco Bhd (RM359.3mil), Berjaya Sports Toto Bhd (RM343.4mil) and Carlsberg Brewery-Malaysia Bhd (RM275mil). 

The biggest surprise was Tanjong plc which, according to its latest cash-flow statement, had cash and cash equivalent of only RM29.3mil. 

These StarBiz findings, gleaned from the closing figures in the cash and cash equivalent column in the cash-flow statements of 600 publicly listed companies, reveal how much cash each has for working capital, or to undertake self-funded investment without seeking outside funding.  

It should be noted that those funds are not available for dividend- or cash-distribution to shareholders. 

The Malaysian Accounting Standards Board (MASB) defines cash as cash-in-hand and demand deposits, while cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 

It is interesting to note that apart from the banking industry, top companies that have a large cash position generally operate in industries that have high barriers to entry, require huge initial capital outlay, or enjoy some form of monopoly or oligopoly, either as strategic industries with limited number of players or on special concessions.  

These include power generation, motor vehicle, telecommunications, airlines and gaming. Occasionally, these cash-rich companies also include shell companies that had previously sold off their businesses, leaving them without a core business. 

Analysts said that due to the unique operating environment within the banking industry, it was normal for banks to hold large cash surpluses to meet withdrawal requirements of customers, which must be available on demand. 

“Of course, having more cash in hand means a bank can meet its commitment more comfortably, even during bad times,'' an analyst said, adding that excess cash was generally more relevant to non-bank companies that did not have to meet those requirements. 

The analyst also pointed out that having a large amount of cash in hand would not only provide good liquidity to a company, but also enable it to adapt more easily to changing operating environments, such as during a crisis or an economic slowdown. 

In addition, companies with a huge cash surplus can capitalise on any good investment opportunity and respond quickly without having to seek financing, a process that can be time consuming. 

However, holding too much cash is not necessarily a good strategy as well, for it can mean companies are not putting their surplus funds to good use. “Maybe, there's a lack of investment opportunity due to the economic slowdown and the company's management decides to be prudent for the time being, or it may not have identified any suitable business yet. But it can also mean the management is not looking hard enough to maximise shareholders' value,'' an analyst said. 

He also pointed out that the investing community generally favours companies that are able to generate good cash flows, rather than companies that have already piled up their cash reserves but are unable to generate more cash. 

That is why cash-rich shells, such as Naluri or Pacificmas, are generally less appealing to fund managers compared with cash flow generating companies such as Maxis or Genting, although the former could spark some speculative buying on the hope of windfall payments such as cash or special dividends. 

It should also be noted that if companies have a lot of cash, it does not necessarily mean that they are free of debts. For example, Telekom has total borrowings of RM10.83bil – as indicated in its balance sheet as at March 31 – but the company has about RM4.19bil held as cash and cash equivalents.  

Similarly, Tenaga's total cash in hand was about RM1.25bil as at Feb 29, but its short- and long-term borrowings stood at RM4.45bil and RM26.8bil respectively. 

A holding company's group cash position could be greatly enhanced should it have cash-rich subsidiaries under its stable. This is because the parent is able to incorporate the earnings of its subsidiaries by virtue of consolidated accounting treatments. Such it seems is the case of YTL Corp, Edaran Otomobil Nasional Bhd and Rashid Hussain Bhd, where cash reserves were boosted by their respective subsidiary units, YTL Power, EON Capital Bhd and RHB Capital Bhd.  

And despite Maybank's huge cash surplus, it is not the country's most cash-rich company. It is believed that national oil company Petroliam Nasional Bhd has the deepest pockets among Malaysian companies, with more than US$9bil (RM34.2bil) of cash or cash equivalent, based on the company's accounts as at March 31. 

Click here for the full list of the Top 50 cash-rich companies

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