SINGAPORE (March 17): Out of the 754 listings on the Singapore Exchange, 323 companies are in a net cash position, according to Bloomberg data. Of these, 100 have net cash comprising more than half their market capitalisations.

Some of them are in this position because of overly conservative management. Others may just be underappreciated. Whatever the case, industry watchers say shareholders of these counters should be agitating for management and board action.

Ultimately, companies have to strike a balance between holding too much or too little cash.

“Cash is a security blanket in case the cash flow from the business gets hit by an economic slowdown. And if credit is easy and cheap to borrow, then there is less need for cash,” says Ong Chao Choon, deals leader at PwC Singapore.

In the current market environment, there is little reason for companies to hold on to large amounts of cash.

Kelvin Tay, regional chief investment officer for southern Asia-Pacific at UBS Wealth Management, says local companies should take advantage of the historically low interest rate environment and the deep depreciation of regional currencies against the US dollar to expand their operations.

“If you are operating in the regional environment, you should be utilising your cash to look out for opportunities,” he says. “The Singapore market is very small; so, you need to look out for opportunities to expand in the Southeast Asian region and beyond.”

At the same time, some of these cash-rich companies may represent great bargains for investors.

Engineering and maintenance services firm PEC, for example, had $148 million in net cash at the end of last year. Its market capitalisation, in comparison, is close to $180 million.

That means investors can buy PEC’s business — which serves the oil and gas, petrochemicals, pharmaceuticals, and oil and chemical terminals industries in Asia — for about $32 million.

Is that a bargain? KGI Securities analyst Joel Ng thinks so.

PEC’s share price “severely undervalues the group’s profitable businesses”, Ng says in a report dated Feb 21.

Meanwhile, DBS Equity Research analyst Ho Pei Hwa thinks PEC is an attractive privatisation candidate. It has a massive cash hoard and minimal debt. And its founders, the Ko family, have a 65% stake in the company.

Which other cash-rich companies should we look out for?

Find out more in our cover story, “Does your company have too much cash?” on pages 10 & 11 of The Edge Singapore (week of March 20, Issue #771), available at newsstands now.