Is Fullshare Holdings (HKG:607) A Risky Investment?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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. We note that Fullshare Holdings Limited (HKG:607) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

What Risk Does Debt Bring?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. If things get really bad, the lenders can take control of the business. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Fullshare Holdings's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Fullshare Holdings had CN¥11.8b of debt in June 2025, down from CN¥16.2b, one year before. On the flip side, it has CN¥7.04b in cash leading to net debt of about CN¥4.73b.

A Look At Fullshare Holdings' Liabilities

The latest balance sheet data shows that Fullshare Holdings had liabilities of CN¥21.6b due within a year, and liabilities of CN¥9.29b falling due after that. On the other hand, it had cash of CN¥7.04b and CN¥9.21b worth of receivables due within a year. So its liabilities total CN¥14.6b more than the combination of its cash and short-term receivables.

This deficit casts a shadow over the CN¥137.1m company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. At the end of the day, Fullshare Holdings would probably need a major re-capitalization if its creditors were to demand repayment. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Fullshare 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.

See our latest analysis for Fullshare Holdings

In the last year Fullshare Holdings had a loss before interest and tax, and actually shrunk its revenue by 5.1%, to CN¥23b. That's not what we would hope to see.

Caveat Emptor

Over the last twelve months Fullshare Holdings produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable CN¥3.5b at the EBIT level. Reflecting on this and the significant total liabilities, it's hard to know what to say about the stock because of our intense dis-affinity for it. Like every long-shot we're sure it has a glossy presentation outlining its blue-sky potential. But the reality is that it is low on liquid assets relative to liabilities, and it lost CN¥4.7b in the last year. So we're not very excited about owning this stock. Its too risky for us. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 3 warning signs with Fullshare Holdings (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.