Vico International Holdings (HKG:1621) Could Easily Take On More 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 Vico International Holdings Limited (HKG:1621) makes use of debt. But the real question is whether this debt is making the company risky.

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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. If things get really bad, the lenders can take control of the business. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Vico International Holdings's Debt?

You can click the graphic below for the historical numbers, but it shows that Vico International Holdings had HK$33.6m of debt in September 2025, down from HK$36.9m, one year before. However, its balance sheet shows it holds HK$104.4m in cash, so it actually has HK$70.8m net cash.

A Look At Vico International Holdings' Liabilities

Zooming in on the latest balance sheet data, we can see that Vico International Holdings had liabilities of HK$51.9m due within 12 months and liabilities of HK$4.99m due beyond that. Offsetting these obligations, it had cash of HK$104.4m as well as receivables valued at HK$34.9m due within 12 months. So it can boast HK$82.4m more liquid assets than total liabilities.

This surplus liquidity suggests that Vico International Holdings' balance sheet could take a hit just as well as Homer Simpson's head can take a punch. Having regard to this fact, we think its balance sheet is as strong as an ox. Simply put, the fact that Vico International Holdings has more cash than debt is arguably a good indication that it can manage its debt safely.

See our latest analysis for Vico International Holdings

The good news is that Vico International Holdings has increased its EBIT by 7.0% over twelve months, which should ease any concerns about debt repayment. When analysing debt levels, the balance sheet is the obvious place to start. But it is Vico International Holdings'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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Vico International Holdings may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last three years, Vico International Holdings actually produced more free cash flow than EBIT. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

While it is always sensible to investigate a company's debt, in this case Vico International Holdings has HK$70.8m in net cash and a decent-looking balance sheet. The cherry on top was that in converted 165% of that EBIT to free cash flow, bringing in HK$28m. The bottom line is that we do not find Vico International Holdings's debt levels at all concerning. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for Vico International Holdings (of which 1 is a bit unpleasant!) you should know about.

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.