Wai Kee Holdings (HKG:610) Has A Rock Solid Balance Sheet

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. We note that Wai Kee Holdings Limited (HKG:610) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

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. If things get really bad, the lenders can take control of the business. 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. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Wai Kee Holdings's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Wai Kee Holdings had HK$756.6m of debt in June 2025, down from HK$1.29b, one year before. However, it does have HK$2.44b in cash offsetting this, leading to net cash of HK$1.68b.

How Strong Is Wai Kee Holdings' Balance Sheet?

We can see from the most recent balance sheet that Wai Kee Holdings had liabilities of HK$5.55b falling due within a year, and liabilities of HK$634.2m due beyond that. Offsetting these obligations, it had cash of HK$2.44b as well as receivables valued at HK$4.83b due within 12 months. So it actually has HK$1.07b more liquid assets than total liabilities.

This surplus strongly suggests that Wai Kee Holdings has a rock-solid balance sheet (and the debt is of no concern whatsoever). Having regard to this fact, we think its balance sheet is as strong as an ox. Succinctly put, Wai Kee Holdings boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Wai Kee Holdings

The good news is that Wai Kee Holdings has increased its EBIT by 5.1% over twelve months, which should ease any concerns about debt repayment. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Wai Kee 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. While Wai Kee Holdings has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Happily for any shareholders, Wai Kee Holdings actually produced more free cash flow than EBIT over the last three years. 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 Wai Kee Holdings has HK$1.68b in net cash and a strong balance sheet. The cherry on top was that in converted 103% of that EBIT to free cash flow, bringing in HK$849m. The bottom line is that we do not find Wai Kee 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. Be aware that Wai Kee Holdings is showing 3 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

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.