We Think Grand Talents Group Holdings (HKG:8516) Has A Fair Chunk Of Debt

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.' 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. We can see that Grand Talents Group Holdings Limited (HKG:8516) does use debt in its business. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Grand Talents Group Holdings Carry?

As you can see below, at the end of September 2025, Grand Talents Group Holdings had HK$13.5m of debt, up from HK$10.8m a year ago. Click the image for more detail. However, it also had HK$1.25m in cash, and so its net debt is HK$12.3m.

How Healthy Is Grand Talents Group Holdings' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Grand Talents Group Holdings had liabilities of HK$26.4m due within 12 months and liabilities of HK$48.0k due beyond that. Offsetting these obligations, it had cash of HK$1.25m as well as receivables valued at HK$27.3m due within 12 months. So it actually has HK$2.08m more liquid assets than total liabilities.

This short term liquidity is a sign that Grand Talents Group Holdings could probably pay off its debt with ease, as its balance sheet is far from stretched. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Grand Talents Group Holdings will need earnings to service that debt. 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.

Check out our latest analysis for Grand Talents Group Holdings

Over 12 months, Grand Talents Group Holdings made a loss at the EBIT level, and saw its revenue drop to HK$25m, which is a fall of 16%. That's not what we would hope to see.

Caveat Emptor

Not only did Grand Talents Group Holdings'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$12m at the EBIT level. Looking on the brighter side, the business has adequate liquid assets, which give it time to grow and develop before its debt becomes a near-term issue. But we'd want to see some positive free cashflow before spending much time on trying to understand the stock. So it seems too risky for our taste. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example Grand Talents Group Holdings has 5 warning signs (and 2 which are a bit concerning) we think you should know about.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.