Does Laekna (HKG:2105) Have A Healthy Balance Sheet?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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 Laekna, Inc. (HKG:2105) makes use of 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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Laekna's Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Laekna had CN¥110.0m of debt, an increase on CN¥57.1m, over one year. However, it does have CN¥743.7m in cash offsetting this, leading to net cash of CN¥633.7m.

How Strong Is Laekna's Balance Sheet?

We can see from the most recent balance sheet that Laekna had liabilities of CN¥194.7m falling due within a year, and liabilities of CN¥5.85m due beyond that. Offsetting these obligations, it had cash of CN¥743.7m as well as receivables valued at CN¥5.46m due within 12 months. So it can boast CN¥548.6m more liquid assets than total liabilities.

This surplus suggests that Laekna has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Laekna boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Laekna's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

See our latest analysis for Laekna

Given its lack of meaningful operating revenue, Laekna shareholders no doubt hope it can fund itself until it has a profitable product.

So How Risky Is Laekna?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months Laekna lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through CN¥211m of cash and made a loss of CN¥240m. But the saving grace is the CN¥633.7m on the balance sheet. That means it could keep spending at its current rate for more than two years. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. 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. For instance, we've identified 5 warning signs for Laekna (2 are significant) you should be aware of.

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.