We Think Sheen Tai Holdings Group (HKG:1335) Can Afford To Drive Business Growth

We can readily understand why investors are attracted to unprofitable companies. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

So, the natural question for Sheen Tai Holdings Group (HKG:1335) shareholders is whether they should be concerned by its rate of cash burn. In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

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When Might Sheen Tai Holdings Group Run Out Of Money?

A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. When Sheen Tai Holdings Group last reported its June 2025 balance sheet in September 2025, it had zero debt and cash worth HK$206m. Importantly, its cash burn was HK$14m over the trailing twelve months. So it had a very long cash runway of many years from June 2025. Even though this is but one measure of the company's cash burn, the thought of such a long cash runway warms our bellies in a comforting way. The image below shows how its cash balance has been changing over the last few years.

See our latest analysis for Sheen Tai Holdings Group

How Well Is Sheen Tai Holdings Group Growing?

Sheen Tai Holdings Group actually ramped up its cash burn by a whopping 78% in the last year, which shows it is boosting investment in the business. That's pretty alarming given that operating revenue dropped 77% over the last year, though the business is likely attempting a strategic pivot. Considering these two factors together makes us nervous about the direction the company seems to be heading. In reality, this article only makes a short study of the company's growth data. This graph of historic earnings and revenue shows how Sheen Tai Holdings Group is building its business over time.

How Hard Would It Be For Sheen Tai Holdings Group To Raise More Cash For Growth?

Sheen Tai Holdings Group seems to be in a fairly good position, in terms of cash burn, but we still think it's worthwhile considering how easily it could raise more money if it wanted to. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.

Sheen Tai Holdings Group has a market capitalisation of HK$341m and burnt through HK$14m last year, which is 4.2% of the company's market value. That's a low proportion, so we figure the company would be able to raise more cash to fund growth, with a little dilution, or even to simply borrow some money.

Is Sheen Tai Holdings Group's Cash Burn A Worry?

Even though its falling revenue makes us a little nervous, we are compelled to mention that we thought Sheen Tai Holdings Group's cash runway was relatively promising. While we're the kind of investors who are always a bit concerned about the risks involved with cash burning companies, the metrics we have discussed in this article leave us relatively comfortable about Sheen Tai Holdings Group's situation. Taking a deeper dive, we've spotted 2 warning signs for Sheen Tai Holdings Group you should be aware of, and 1 of them shouldn't be ignored.

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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.