These 4 Measures Indicate That ASMPT (HKG:522) Is Using Debt Reasonably Well

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 note that ASMPT Limited (HKG:522) does have debt on its balance sheet. 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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does ASMPT Carry?

The chart below, which you can click on for greater detail, shows that ASMPT had HK$4.66b in debt in June 2025; about the same as the year before. However, it does have HK$5.00b in cash offsetting this, leading to net cash of HK$341.7m.

A Look At ASMPT's Liabilities

We can see from the most recent balance sheet that ASMPT had liabilities of HK$4.74b falling due within a year, and liabilities of HK$4.24b due beyond that. Offsetting this, it had HK$5.00b in cash and HK$4.76b in receivables that were due within 12 months. So it actually has HK$782.9m more liquid assets than total liabilities.

This short term liquidity is a sign that ASMPT could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, ASMPT boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for ASMPT

Shareholders should be aware that ASMPT's EBIT was down 48% last year. If that decline continues then paying off debt will be harder than selling foie gras at a vegan convention. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine ASMPT'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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. ASMPT may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Happily for any shareholders, ASMPT actually produced more free cash flow than EBIT over the last three years. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that ASMPT has net cash of HK$341.7m, as well as more liquid assets than liabilities. And it impressed us with free cash flow of -HK$359m, being 106% of its EBIT. So we don't have any problem with ASMPT's use of debt. While ASMPT didn't make a statutory profit in the last year, its positive EBIT suggests that profitability might not be far away. Click here to see if its earnings are heading in the right direction, over the medium term.

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.