Health Check: How Prudently Does Tse Sui Luen Jewellery (International) (HKG:417) Use Debt?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. Importantly, Tse Sui Luen Jewellery (International) Limited (HKG:417) does carry debt. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

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. 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.

What Is Tse Sui Luen Jewellery (International)'s Debt?

As you can see below, Tse Sui Luen Jewellery (International) had HK$669.6m of debt at September 2025, down from HK$1.00b a year prior. On the flip side, it has HK$96.4m in cash leading to net debt of about HK$573.2m.

A Look At Tse Sui Luen Jewellery (International)'s Liabilities

Zooming in on the latest balance sheet data, we can see that Tse Sui Luen Jewellery (International) had liabilities of HK$1.14b due within 12 months and liabilities of HK$86.6m due beyond that. Offsetting these obligations, it had cash of HK$96.4m as well as receivables valued at HK$25.5m due within 12 months. So it has liabilities totalling HK$1.10b more than its cash and near-term receivables, combined.

This deficit casts a shadow over the HK$254.2m company, like a colossus towering over mere mortals. So we definitely think shareholders need to watch this one closely. After all, Tse Sui Luen Jewellery (International) would likely require a major re-capitalisation if it had to pay its creditors today. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Tse Sui Luen Jewellery (International) 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 Tse Sui Luen Jewellery (International)

Over 12 months, Tse Sui Luen Jewellery (International) made a loss at the EBIT level, and saw its revenue drop to HK$1.6b, which is a fall of 27%. To be frank that doesn't bode well.

Caveat Emptor

Not only did Tse Sui Luen Jewellery (International)'s revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Indeed, it lost a very considerable HK$93m at the EBIT level. Combining this information with the significant liabilities we already touched on makes us very hesitant about this stock, to say the least. That said, it is possible that the company will turn its fortunes around. Nevertheless, we would not bet on it given that it lost HK$189m in just last twelve months, and it doesn't have much by way of liquid assets. So while it's not wise to assume the company will fail, we do think it's risky. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. To that end, you should learn about the 3 warning signs we've spotted with Tse Sui Luen Jewellery (International) (including 2 which are concerning) .

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.