Does North Asia Strategic Holdings (HKG:8080) Have A Healthy 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 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 North Asia Strategic Holdings Limited (HKG:8080) makes use of debt. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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 think about a company's use of debt, we first look at cash and debt together.

What Is North Asia Strategic Holdings's Net Debt?

As you can see below, at the end of September 2025, North Asia Strategic Holdings had HK$29.6m of debt, up from HK$8.71m a year ago. Click the image for more detail. However, its balance sheet shows it holds HK$444.1m in cash, so it actually has HK$414.5m net cash.

How Healthy Is North Asia Strategic Holdings' Balance Sheet?

We can see from the most recent balance sheet that North Asia Strategic Holdings had liabilities of HK$715.7m falling due within a year, and liabilities of HK$24.4m due beyond that. Offsetting these obligations, it had cash of HK$444.1m as well as receivables valued at HK$434.6m due within 12 months. So it can boast HK$138.6m more liquid assets than total liabilities.

This surplus liquidity suggests that North Asia Strategic Holdings' balance sheet could take a hit just as well as Homer Simpson's head can take a punch. On this view, lenders should feel as safe as the beloved of a black-belt karate master. Succinctly put, North Asia Strategic Holdings boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for North Asia Strategic Holdings

It was also good to see that despite losing money on the EBIT line last year, North Asia Strategic Holdings turned things around in the last 12 months, delivering and EBIT of HK$31m. There's no doubt that we learn most about debt from the balance sheet. But it is North Asia Strategic 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, a company can only pay off debt with cold hard cash, not accounting profits. While North Asia Strategic 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. Over the last year, North Asia Strategic Holdings actually produced more free cash flow than EBIT. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that North Asia Strategic Holdings has net cash of HK$414.5m, as well as more liquid assets than liabilities. And it impressed us with free cash flow of HK$67m, being 219% of its EBIT. So we don't think North Asia Strategic Holdings's use of debt is risky. 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 example North Asia Strategic Holdings has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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.