Is Magnus Concordia Group (HKG:1172) Using Debt In A Risky Way?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Magnus Concordia Group Limited (HKG:1172) does carry debt. But should shareholders be worried about its use of debt?

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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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Magnus Concordia Group's Debt?

As you can see below, Magnus Concordia Group had HK$125.2m of debt at September 2025, down from HK$142.1m a year prior. However, it also had HK$13.0m in cash, and so its net debt is HK$112.3m.

A Look At Magnus Concordia Group's Liabilities

According to the last reported balance sheet, Magnus Concordia Group had liabilities of HK$540.6m due within 12 months, and liabilities of HK$19.7m due beyond 12 months. Offsetting these obligations, it had cash of HK$13.0m as well as receivables valued at HK$42.0m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by HK$505.4m.

The deficiency here weighs heavily on the HK$127.1m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we'd watch its balance sheet closely, without a doubt. After all, Magnus Concordia Group would likely require a major re-capitalisation if it had to pay its creditors today. There's no doubt that we learn most about debt from the balance sheet. But it is Magnus Concordia 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 Magnus Concordia Group

In the last year Magnus Concordia Group had a loss before interest and tax, and actually shrunk its revenue by 14%, to HK$169m. That's not what we would hope to see.

Caveat Emptor

Not only did Magnus Concordia Group'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$15m 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. Of course, it may be able to improve its situation with a bit of luck and good execution. But we think that is unlikely, given it is low on liquid assets, and burned through HK$3.2m in the last year. So we think this stock is risky, like walking through a dirty dog park with a mask on. 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 instance, we've identified 2 warning signs for Magnus Concordia Group (1 makes us a bit uncomfortable) you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.