We Think A-Smart Holdings (SGX:BQC) Has A Fair Chunk Of 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.' 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. We note that A-Smart Holdings Ltd. (SGX:BQC) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is A-Smart Holdings's Debt?

The image below, which you can click on for greater detail, shows that at July 2025 A-Smart Holdings had debt of S$5.18m, up from S$4.66m in one year. However, it also had S$3.67m in cash, and so its net debt is S$1.52m.

How Strong Is A-Smart Holdings' Balance Sheet?

According to the last reported balance sheet, A-Smart Holdings had liabilities of S$11.4m due within 12 months, and liabilities of S$1.73m due beyond 12 months. On the other hand, it had cash of S$3.67m and S$3.47m worth of receivables due within a year. So its liabilities total S$5.97m more than the combination of its cash and short-term receivables.

A-Smart Holdings has a market capitalization of S$27.9m, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. There's no doubt that we learn most about debt from the balance sheet. But it is A-Smart 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.

See our latest analysis for A-Smart Holdings

Over 12 months, A-Smart Holdings made a loss at the EBIT level, and saw its revenue drop to S$7.0m, which is a fall of 5.7%. We would much prefer see growth.

Caveat Emptor

Over the last twelve months A-Smart Holdings produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at S$1.5m. 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. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled S$2.6m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. 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. For example A-Smart Holdings has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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.