Despite Lacking Profits Minshang Creative Technology Holdings (HKG:1632) Seems To Be On Top Of Its Debt

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.' 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. Importantly, Minshang Creative Technology Holdings Limited (HKG:1632) does carry debt. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Minshang Creative Technology Holdings Carry?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 Minshang Creative Technology Holdings had HK$104.3m of debt, an increase on none, over one year. On the flip side, it has HK$7.37m in cash leading to net debt of about HK$97.0m.

A Look At Minshang Creative Technology Holdings' Liabilities

We can see from the most recent balance sheet that Minshang Creative Technology Holdings had liabilities of HK$244.2m falling due within a year, and liabilities of HK$5.36m due beyond that. Offsetting these obligations, it had cash of HK$7.37m as well as receivables valued at HK$258.1m due within 12 months. So it can boast HK$15.9m more liquid assets than total liabilities.

It's good to see that Minshang Creative Technology Holdings has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Due to its strong net asset position, it is not likely to face issues with its lenders. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Minshang Creative Technology 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 Minshang Creative Technology Holdings

Over 12 months, Minshang Creative Technology Holdings reported revenue of HK$20m, which is a gain of 16,747%, although it did not report any earnings before interest and tax. That's virtually the hole-in-one of revenue growth!

Caveat Emptor

While we can certainly appreciate Minshang Creative Technology Holdings's revenue growth, its earnings before interest and tax (EBIT) loss is not ideal. Indeed, it lost a very considerable HK$34m at the EBIT level. Looking on the brighter side, the business has adequate liquid assets, which give it time to grow and develop before its debt becomes a near-term issue. But we'd want to see some positive free cashflow before spending much time on trying to understand the stock. Nonetheless, the revenue growth is clearly impressive and that would make it easier to raise capital if need be. So it's risky, but with some potential. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 5 warning signs we've spotted with Minshang Creative Technology Holdings (including 3 which are concerning) .

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.