Is Hingtex Holdings (HKG:1968) Using Debt Sensibly?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. We can see that Hingtex Holdings Limited (HKG:1968) does use debt in its business. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Hingtex Holdings's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Hingtex Holdings had debt of HK$36.1m, up from HK$28.7m in one year. However, its balance sheet shows it holds HK$43.0m in cash, so it actually has HK$6.92m net cash.

A Look At Hingtex Holdings' Liabilities

According to the last reported balance sheet, Hingtex Holdings had liabilities of HK$71.9m due within 12 months, and liabilities of HK$14.8m due beyond 12 months. Offsetting this, it had HK$43.0m in cash and HK$40.5m in receivables that were due within 12 months. So it has liabilities totalling HK$3.26m more than its cash and near-term receivables, combined.

Since publicly traded Hingtex Holdings shares are worth a total of HK$79.4m, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, Hingtex Holdings boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Hingtex 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.

See our latest analysis for Hingtex Holdings

In the last year Hingtex Holdings wasn't profitable at an EBIT level, but managed to grow its revenue by 18%, to HK$213m. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Hingtex Holdings?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months Hingtex Holdings lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through HK$17m of cash and made a loss of HK$28m. But at least it has HK$6.92m on the balance sheet to spend on growth, near-term. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. 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 3 warning signs with Hingtex Holdings (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.