Health Check: How Prudently Does Grand Ming Group Holdings (HKG:1271) Use 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. Importantly, Grand Ming Group Holdings Limited (HKG:1271) does carry debt. But should shareholders be worried about its use of debt?

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Grand Ming Group Holdings's Debt?

The chart below, which you can click on for greater detail, shows that Grand Ming Group Holdings had HK$6.12b in debt in September 2025; about the same as the year before. Net debt is about the same, since the it doesn't have much cash.

A Look At Grand Ming Group Holdings' Liabilities

Zooming in on the latest balance sheet data, we can see that Grand Ming Group Holdings had liabilities of HK$5.87b due within 12 months and liabilities of HK$843.0m due beyond that. Offsetting this, it had HK$115.5m in cash and HK$34.3m in receivables that were due within 12 months. So its liabilities total HK$6.56b more than the combination of its cash and short-term receivables.

This deficit casts a shadow over the HK$1.02b company, like a colossus towering over mere mortals. So we definitely think shareholders need to watch this one closely. At the end of the day, Grand Ming Group Holdings would probably need a major re-capitalization if its creditors were to demand repayment. There's no doubt that we learn most about debt from the balance sheet. But it is Grand Ming Group 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.

See our latest analysis for Grand Ming Group Holdings

In the last year Grand Ming Group Holdings had a loss before interest and tax, and actually shrunk its revenue by 30%, to HK$716m. That makes us nervous, to say the least.

Caveat Emptor

While Grand Ming Group Holdings's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. To be specific the EBIT loss came in at HK$73m. 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 HK$371m in the last year. So we're not very excited about owning this stock. Its too risky for us. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Grand Ming Group Holdings 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.