Is Shenyang Public Utility Holdings (HKG:747) Weighed On By Its Debt Load?

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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Shenyang Public Utility Holdings Company Limited (HKG:747) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Shenyang Public Utility Holdings's Net Debt?

As you can see below, at the end of June 2025, Shenyang Public Utility Holdings had CN¥13.2m of debt, up from CN¥9.04m a year ago. Click the image for more detail. However, because it has a cash reserve of CN¥8.60m, its net debt is less, at about CN¥4.58m.

How Healthy Is Shenyang Public Utility Holdings' Balance Sheet?

We can see from the most recent balance sheet that Shenyang Public Utility Holdings had liabilities of CN¥197.3m falling due within a year, and liabilities of CN¥10.4m due beyond that. On the other hand, it had cash of CN¥8.60m and CN¥118.0k worth of receivables due within a year. So it has liabilities totalling CN¥199.0m more than its cash and near-term receivables, combined.

The deficiency here weighs heavily on the CN¥119.2m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we definitely think shareholders need to watch this one closely. At the end of the day, Shenyang Public Utility Holdings would probably need a major re-capitalization if its creditors were to demand repayment. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Shenyang Public Utility 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.

See our latest analysis for Shenyang Public Utility Holdings

In the last year Shenyang Public Utility Holdings had a loss before interest and tax, and actually shrunk its revenue by 72%, to CN¥1.7m. That makes us nervous, to say the least.

Caveat Emptor

While Shenyang Public Utility Holdings's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Its EBIT loss was a whopping CN¥49m. When we look at that alongside the significant liabilities, we're not particularly confident about the company. We'd want to see some strong near-term improvements before getting too interested in the stock. Not least because it had negative free cash flow of CN¥43m over the last twelve months. So suffice it to say we consider the stock to be risky. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 5 warning signs for Shenyang Public Utility Holdings (4 are significant) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.