Is InnoTek (SGX:M14) Weighed On By Its Debt Load?

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 note that InnoTek Limited (SGX:M14) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

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, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is InnoTek's Net Debt?

You can click the graphic below for the historical numbers, but it shows that InnoTek had S$7.37m of debt in June 2025, down from S$9.00m, one year before. However, it does have S$51.7m in cash offsetting this, leading to net cash of S$44.3m.

How Strong Is InnoTek's Balance Sheet?

We can see from the most recent balance sheet that InnoTek had liabilities of S$79.5m falling due within a year, and liabilities of S$8.02m due beyond that. On the other hand, it had cash of S$51.7m and S$73.2m worth of receivables due within a year. So it can boast S$37.4m more liquid assets than total liabilities.

This excess liquidity is a great indication that InnoTek's balance sheet is almost as strong as Fort Knox. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Simply put, the fact that InnoTek has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since InnoTek will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for InnoTek

In the last year InnoTek had a loss before interest and tax, and actually shrunk its revenue by 6.5%, to S$219m. That's not what we would hope to see.

So How Risky Is InnoTek?

While InnoTek lost money on an earnings before interest and tax (EBIT) level, it actually booked a paper profit of S$3.0m. So taking that on face value, and considering the cash, we don't think its very risky in the near term. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. 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. Case in point: We've spotted 3 warning signs for InnoTek you should be aware of, and 1 of them makes us a bit uncomfortable.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.