Does Wing Fung Group Asia (HKG:8526) Have A Healthy Balance Sheet?

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.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that Wing Fung Group Asia Limited (HKG:8526) does use debt in its business. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

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, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Wing Fung Group Asia's Net Debt?

The image below, which you can click on for greater detail, shows that Wing Fung Group Asia had debt of HK$19.4m at the end of June 2025, a reduction from HK$21.9m over a year. On the flip side, it has HK$10.8m in cash leading to net debt of about HK$8.56m.

A Look At Wing Fung Group Asia's Liabilities

Zooming in on the latest balance sheet data, we can see that Wing Fung Group Asia had liabilities of HK$46.4m due within 12 months and liabilities of HK$3.0k due beyond that. Offsetting this, it had HK$10.8m in cash and HK$85.9m in receivables that were due within 12 months. So it can boast HK$50.4m more liquid assets than total liabilities.

This excess liquidity is a great indication that Wing Fung Group Asia's balance sheet is almost as strong as Fort Knox. On this view, lenders should feel as safe as the beloved of a black-belt karate master. 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 Wing Fung Group Asia 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.

See our latest analysis for Wing Fung Group Asia

In the last year Wing Fung Group Asia wasn't profitable at an EBIT level, but managed to grow its revenue by 34%, to HK$165m. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Despite the top line growth, Wing Fung Group Asia still had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost HK$2.1m at the EBIT level. That said, we're impressed with the strong balance sheet liquidity. That should give the business time to grow its cashflow. While the stock is probably a bit risky, there may be an opportunity if the business itself improves, allowing the company to stage a recovery. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Wing Fung Group Asia you should know about.

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.

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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.