Does Advanced Holdings (SGX:BLZ) Have A Healthy Balance Sheet?

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.' 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. Importantly, Advanced Holdings Ltd. (SGX:BLZ) does carry debt. But is this debt a concern to shareholders?

When Is Debt A Problem?

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. 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, 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.

View our latest analysis for Advanced Holdings

How Much Debt Does Advanced Holdings Carry?

The image below, which you can click on for greater detail, shows that at June 2021 Advanced Holdings had debt of S$9.27m, up from S$8.23m in one year. But on the other hand it also has S$30.9m in cash, leading to a S$21.6m net cash position.

How Strong Is Advanced Holdings' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Advanced Holdings had liabilities of S$22.1m due within 12 months and liabilities of S$9.72m due beyond that. On the other hand, it had cash of S$30.9m and S$15.5m worth of receivables due within a year. So it can boast S$14.6m more liquid assets than total liabilities.

This luscious liquidity implies that Advanced Holdings' balance sheet is sturdy like a giant sequoia tree. Having regard to this fact, we think its balance sheet is as strong as an ox. Succinctly put, Advanced Holdings boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But it is Advanced Holdings's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

In the last year Advanced Holdings had a loss before interest and tax, and actually shrunk its revenue by 56%, to S$41m. That makes us nervous, to say the least.

So How Risky Is Advanced Holdings?

While Advanced Holdings lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow S$20m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. The next few years will be important as the business matures. 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. For example, we've discovered 3 warning signs for Advanced Holdings that you should be aware of before investing here.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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.

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