Here's Why Qian Hu (SGX:BCV) Can Manage Its Debt Responsibly

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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. As with many other companies Qian Hu Corporation Limited (SGX:BCV) makes use of debt. But is this debt a concern to shareholders?

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When Is Debt A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Qian Hu's Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Qian Hu had debt of S$8.27m, up from S$5.00m in one year. But it also has S$16.2m in cash to offset that, meaning it has S$7.93m net cash.

How Healthy Is Qian Hu's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Qian Hu had liabilities of S$16.7m due within 12 months and liabilities of S$210.7k due beyond that. Offsetting these obligations, it had cash of S$16.2m as well as receivables valued at S$12.2m due within 12 months. So it actually has S$11.5m more liquid assets than total liabilities.

This excess liquidity is a great indication that Qian Hu's balance sheet is almost as strong as Fort Knox. Having regard to this fact, we think its balance sheet is as strong as an ox. Succinctly put, Qian Hu boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Qian Hu

We also note that Qian Hu improved its EBIT from a last year's loss to a positive S$453k. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Qian Hu 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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Qian Hu 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. During the last year, Qian Hu burned a lot of cash. While that may be a result of expenditure for growth, it does make the debt far more risky.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Qian Hu has net cash of S$7.93m, as well as more liquid assets than liabilities. So we don't have any problem with Qian Hu's use of debt. 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. These risks can be hard to spot. Every company has them, and we've spotted 4 warning signs for Qian Hu (of which 2 shouldn't be ignored!) 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.