Z-Score - UOB Kay Hian 2020-03-31: A Testing Time For Singapore Stocks

Singapore Strategy - UOB Kay Hian Research | SGinvestors.io BANYAN TREE HOLDINGS LIMITED (SGX:B58)

Z-Score - A Testing Time For Singapore Stocks

  • A “black swan” event such as COVID-19 presents a testing time for Singapore stocks. We use Altman’s Z-score to look at Singapore listed companies at the bottom of the scale to see which of them face challenges, but conclude that while many appear to be in distress, insolvency is not a key risk due to strong balance sheets, decent interest coverage ratios and well-capitalised major shareholders.
  • We continue to prefer high-yield stocks in the financial sector, telcos and selected REIT segments.



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What is the Z-score?

  • Edward Altman, a professor at the Stern School of Business, New York University, developed the Altman Z-score in 1968 as statistically derived predictive model to determine whether a company, notably in the manufacturing space, is headed for bankruptcy. The formula takes into account profitability, leverage, liquidity, solvency, and activity ratios whereby a Z-score at or below 1.8 suggests a company might be headed for bankruptcy, while a score of 3.0 and above suggests a company is in solid financial positioning.
  • See attached PDF report for assessment for the list of SGX listed companies that are in the Z-score 'Distress' zones.





Adrian LOH UOB Kay Hian Research | Singapore Research Team UOB Kay Hian | https://research.uobkayhian.com/ 2020-03-31
SGX Stock Analyst Report BUY MAINTAIN BUY 1.000 SAME 1.000



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