Is Ju Teng International Holdings (HKG:3336) Weighed On By Its Debt Load?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Ju Teng International Holdings Limited (HKG:3336) does carry debt. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Ju Teng International Holdings Carry?

You can click the graphic below for the historical numbers, but it shows that Ju Teng International Holdings had HK$2.81b of debt in June 2025, down from HK$2.97b, one year before. However, it also had HK$1.16b in cash, and so its net debt is HK$1.65b.

How Strong Is Ju Teng International Holdings' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Ju Teng International Holdings had liabilities of HK$4.74b due within 12 months and liabilities of HK$141.4m due beyond that. Offsetting this, it had HK$1.16b in cash and HK$2.18b in receivables that were due within 12 months. So its liabilities total HK$1.55b more than the combination of its cash and short-term receivables.

Given this deficit is actually higher than the company's market capitalization of HK$1.42b, we think shareholders really should watch Ju Teng International Holdings's debt levels, like a parent watching their child ride a bike for the first time. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Ju Teng International Holdings will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for Ju Teng International Holdings

Over 12 months, Ju Teng International Holdings made a loss at the EBIT level, and saw its revenue drop to HK$5.7b, which is a fall of 11%. We would much prefer see growth.

Caveat Emptor

Not only did Ju Teng International Holdings's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Its EBIT loss was a whopping HK$625m. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it had negative free cash flow of HK$193m over the last twelve months. So suffice it to say we consider the stock to be risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 2 warning signs for Ju Teng International Holdings you should be aware of, and 1 of them makes us a bit uncomfortable.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.