We Think Ling Yui Holdings (HKG:784) 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.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. Importantly, Ling Yui Holdings Limited (HKG:784) does carry debt. But should shareholders be worried about its use of debt?

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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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Ling Yui Holdings Carry?

You can click the graphic below for the historical numbers, but it shows that Ling Yui Holdings had HK$15.1m of debt in September 2025, down from HK$31.3m, one year before. However, it also had HK$5.64m in cash, and so its net debt is HK$9.43m.

How Healthy Is Ling Yui Holdings' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Ling Yui Holdings had liabilities of HK$43.4m due within 12 months and liabilities of HK$6.09m due beyond that. Offsetting this, it had HK$5.64m in cash and HK$70.1m in receivables that were due within 12 months. So it actually has HK$26.3m more liquid assets than total liabilities.

This excess liquidity suggests that Ling Yui Holdings is taking a careful approach to debt. Due to its strong net asset position, it is not likely to face issues with its lenders. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Ling Yui 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.

Check out our latest analysis for Ling Yui Holdings

In the last year Ling Yui Holdings had a loss before interest and tax, and actually shrunk its revenue by 9.1%, to HK$185m. That's not what we would hope to see.

Caveat Emptor

Importantly, Ling Yui Holdings had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost a very considerable HK$24m 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 a profit would do more to inspire us to research the business more closely. So it seems too risky for our taste. 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 3 warning signs for Ling Yui Holdings (of which 2 are a bit unpleasant!) you should know about.

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.