Debt Servicing Ratio for Keppel Ltd BN4

Hi Eric,

To calculate Keppel’s debt serving ratio, I actually used operating cash flow before working capital less tax paid instead of the usual operating cash flow. This is to take out the short-term fluctuations in working capital (like accounts receivable, payable, and inventory) after tax payments.

Their debt servicing ratio was actually below or closed to 30% most of the times except for 2o20, 2021, and 2022. The company was going through a restructuring period to make the business more asset-light and rely more on recurring income. I won’t penalise them too much and will still give them a pass based on its debt servicing ratio alone.

 

Actually for most other companies, I will just use the usual operating cash flow to calculate this ratio like what you did. Keppel is an uncommon exception, we realised the operating cash flow was sometimes affected a lot by the account receivables, payables, and so on, so we used this kind of adjusted operating cash flow to see its 'true' money flowing in.

Your interest paid and interest received are correct. Alternatively, you can also use the Interest Expenses and the Interest Income in the Profit and Loss Statements. Both figures are similar, so stick to either one is fine.   For Interest Expenses, I will usually go to the notes and remove the lease liabilities interest payment in order to see the actual interest payments to banks that could make a company bankrupt.

Hi Hoi Shak, As mentioned above, it calculate as such
operating cash flow bf working capital less tax paid = 866260-116,086 =750174
interest paid – interest received / 750174
364290-70,231/750174 = 39.20%
Am I right ? it above 30%, still a good dividend company ?
Thank you and have a great day ! Jac