Is Jade Gas Holdings (ASX:JGH) A Risky Investment?

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. As with many other companies Jade Gas Holdings Limited (ASX:JGH) makes use of debt. But the more important question is: how much risk is that debt creating?

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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. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Jade Gas Holdings's Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Jade Gas Holdings had AU$10.4m of debt, an increase on AU$3.87m, over one year. Net debt is about the same, since the it doesn't have much cash.

How Strong Is Jade Gas Holdings' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Jade Gas Holdings had liabilities of AU$12.2m due within 12 months and liabilities of AU$47.0k due beyond that. Offsetting this, it had AU$92.5k in cash and AU$61.2k in receivables that were due within 12 months. So its liabilities total AU$12.1m more than the combination of its cash and short-term receivables.

Of course, Jade Gas Holdings has a market capitalization of AU$67.5m, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Jade Gas 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 Jade Gas Holdings

Given its lack of meaningful operating revenue, Jade Gas Holdings shareholders no doubt hope it can fund itself until it can sell some combustibles.

Caveat Emptor

Over the last twelve months Jade Gas Holdings produced an earnings before interest and tax (EBIT) loss. Indeed, it lost AU$4.9m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled AU$9.9m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. 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. For instance, we've identified 5 warning signs for Jade Gas Holdings (3 are potentially serious) you should be aware of.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.