CK Life Sciences Int'l. (Holdings) (HKG:775) Is Carrying A Fair Bit Of Debt

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. Importantly, CK Life Sciences Int'l., (Holdings) Inc. (HKG:775) does carry debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. If things get really bad, the lenders can take control of the business. 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. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does CK Life Sciences Int'l. (Holdings) Carry?

As you can see below, at the end of June 2025, CK Life Sciences Int'l. (Holdings) had HK$5.87b of debt, up from HK$5.47b a year ago. Click the image for more detail. However, because it has a cash reserve of HK$797.8m, its net debt is less, at about HK$5.08b.

How Strong Is CK Life Sciences Int'l. (Holdings)'s Balance Sheet?

Zooming in on the latest balance sheet data, we can see that CK Life Sciences Int'l. (Holdings) had liabilities of HK$2.12b due within 12 months and liabilities of HK$5.51b due beyond that. Offsetting these obligations, it had cash of HK$797.8m as well as receivables valued at HK$1.07b due within 12 months. So it has liabilities totalling HK$5.76b more than its cash and near-term receivables, combined.

CK Life Sciences Int'l. (Holdings) has a market capitalization of HK$9.71b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. There's no doubt that we learn most about debt from the balance sheet. But it is CK Life Sciences Int'l. (Holdings)'s earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for CK Life Sciences Int'l. (Holdings)

Over 12 months, CK Life Sciences Int'l. (Holdings) reported revenue of HK$5.5b, which is a gain of 2.1%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Over the last twelve months CK Life Sciences Int'l. (Holdings) produced an earnings before interest and tax (EBIT) loss. Indeed, it lost HK$109m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. We would feel better if it turned its trailing twelve month loss of HK$278m into a profit. So we do think this stock is quite risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for CK Life Sciences Int'l. (Holdings) you should know about.

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.