Telecom Digital Holdings (HKG:6033) Has Debt But No Earnings; Should You Worry?

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 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. We note that Telecom Digital Holdings Limited (HKG:6033) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

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 usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

What Is Telecom Digital Holdings's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Telecom Digital Holdings had HK$588.2m of debt in September 2025, down from HK$682.7m, one year before. However, it does have HK$45.1m in cash offsetting this, leading to net debt of about HK$543.1m.

How Strong Is Telecom Digital Holdings' Balance Sheet?

We can see from the most recent balance sheet that Telecom Digital Holdings had liabilities of HK$676.3m falling due within a year, and liabilities of HK$18.3m due beyond that. On the other hand, it had cash of HK$45.1m and HK$51.7m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by HK$597.9m.

This deficit casts a shadow over the HK$282.6m company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. After all, Telecom Digital Holdings would likely require a major re-capitalisation if it had to pay its creditors today. There's no doubt that we learn most about debt from the balance sheet. But it is Telecom Digital 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.

See our latest analysis for Telecom Digital Holdings

Over 12 months, Telecom Digital Holdings saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that hardly impresses, its not too bad either.

Caveat Emptor

Over the last twelve months Telecom Digital Holdings produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at HK$2.0m. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. But on the bright side the company actually produced a statutory profit of HK$3.8m and free cash flow of HK$132m. So there is definitely a chance that it can improve things in the next few years. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 5 warning signs with Telecom Digital Holdings (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.