Does Dragon Rise Group Holdings (HKG:6829) Have A Healthy Balance Sheet?

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.' 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. As with many other companies Dragon Rise Group Holdings Limited (HKG:6829) makes use of debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Dragon Rise Group Holdings Carry?

As you can see below, Dragon Rise Group Holdings had HK$21.3m of debt at September 2025, down from HK$50.7m a year prior. But on the other hand it also has HK$60.8m in cash, leading to a HK$39.5m net cash position.

How Healthy Is Dragon Rise Group Holdings' Balance Sheet?

According to the last reported balance sheet, Dragon Rise Group Holdings had liabilities of HK$152.0m due within 12 months, and liabilities of HK$10.2m due beyond 12 months. Offsetting this, it had HK$60.8m in cash and HK$366.4m in receivables that were due within 12 months. So it actually has HK$265.0m more liquid assets than total liabilities.

This luscious liquidity implies that Dragon Rise Group Holdings' balance sheet is sturdy like a giant sequoia tree. Having regard to this fact, we think its balance sheet is as strong as an ox. Succinctly put, Dragon Rise Group Holdings boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for Dragon Rise Group Holdings

Importantly, Dragon Rise Group Holdings's EBIT fell a jaw-dropping 25% in the last twelve months. If that decline continues then paying off debt will be harder than selling foie gras at a vegan convention. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Dragon Rise Group 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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Dragon Rise Group Holdings may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last three years, Dragon Rise Group Holdings saw substantial negative free cash flow, in total. While that may be a result of expenditure for growth, it does make the debt far more risky.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Dragon Rise Group Holdings has net cash of HK$39.5m, as well as more liquid assets than liabilities. So while Dragon Rise Group Holdings does not have a great balance sheet, it's certainly not too bad. 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. We've identified 2 warning signs with Dragon Rise Group Holdings , and understanding them should be part of your investment process.

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.