We Think ITC Properties Group (HKG:199) Has A Fair Chunk Of Debt

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies ITC Properties Group Limited (HKG:199) makes use of debt. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is ITC Properties Group's Debt?

As you can see below, ITC Properties Group had HK$752.7m of debt at September 2025, down from HK$1.18b a year prior. However, it does have HK$50.3m in cash offsetting this, leading to net debt of about HK$702.4m.

A Look At ITC Properties Group's Liabilities

Zooming in on the latest balance sheet data, we can see that ITC Properties Group had liabilities of HK$1.18b due within 12 months and liabilities of HK$707.0k due beyond that. On the other hand, it had cash of HK$50.3m and HK$432.3m worth of receivables due within a year. So its liabilities total HK$696.0m more than the combination of its cash and short-term receivables.

While this might seem like a lot, it is not so bad since ITC Properties Group has a market capitalization of HK$1.18b, and so it could probably strengthen its balance sheet by raising capital if it needed to. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. When analysing debt levels, the balance sheet is the obvious place to start. But it is ITC Properties Group's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

View our latest analysis for ITC Properties Group

In the last year ITC Properties Group wasn't profitable at an EBIT level, but managed to grow its revenue by 3,957%, to HK$388m. That's virtually the hole-in-one of revenue growth!

Caveat Emptor

Even though ITC Properties Group managed to grow its top line quite deftly, the cold hard truth is that it is losing money on the EBIT line. Indeed, it lost a very considerable HK$426m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. We would feel better if it turned its trailing twelve month loss of HK$429m into a profit. So in short it's a really risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - ITC Properties Group has 2 warning signs we think you should be aware of.

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.

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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.