We Think China International Holdings (SGX:BEH) Has A Fair Chunk Of Debt
Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. Importantly, China International Holdings Limited (SGX:BEH) does carry debt. But the more important question is: how much risk is that debt creating?
When Is Debt A Problem?
Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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 step when considering a company's debt levels is to consider its cash and debt together.
What Is China International Holdings's Net Debt?
The chart below, which you can click on for greater detail, shows that China International Holdings had CN¥104.1m in debt in September 2025; about the same as the year before. However, it does have CN¥33.9m in cash offsetting this, leading to net debt of about CN¥70.2m.
How Strong Is China International Holdings' Balance Sheet?
We can see from the most recent balance sheet that China International Holdings had liabilities of CN¥173.9m falling due within a year, and liabilities of CN¥85.9m due beyond that. On the other hand, it had cash of CN¥33.9m and CN¥271.7m worth of receivables due within a year. So it can boast CN¥45.8m more liquid assets than total liabilities.
This surplus strongly suggests that China International Holdings has a rock-solid balance sheet (and the debt is of no concern whatsoever). Having regard to this fact, we think its balance sheet is as strong as an ox. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since China International Holdings will need earnings to service that debt. 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.
View our latest analysis for China International Holdings
In the last year China International Holdings had a loss before interest and tax, and actually shrunk its revenue by 3.8%, to CN¥90m. That's not what we would hope to see.
Caveat Emptor
Importantly, China International Holdings had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping CN¥3.8m. Having said that, the balance sheet has plenty of liquid assets for now. That will give the company some time and space to grow and develop its business as need be. The company is risky because it will grow into the future to get to profitability and free cash flow. 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 instance, we've identified 3 warning signs for China International Holdings that you should be aware of.
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.