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PPS International (Holdings) (HKG:8201) Has A Rock Solid Balance Sheet

Simply Wall St · 12h ago

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 note that PPS International (Holdings) Limited (HKG:8201) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does PPS International (Holdings) Carry?

As you can see below, PPS International (Holdings) had HK$18.3m of debt at June 2025, down from HK$19.4m a year prior. However, its balance sheet shows it holds HK$112.6m in cash, so it actually has HK$94.3m net cash.

debt-equity-history-analysis
SEHK:8201 Debt to Equity History December 16th 2025

A Look At PPS International (Holdings)'s Liabilities

The latest balance sheet data shows that PPS International (Holdings) had liabilities of HK$107.2m due within a year, and liabilities of HK$1.67m falling due after that. Offsetting these obligations, it had cash of HK$112.6m as well as receivables valued at HK$120.6m due within 12 months. So it actually has HK$124.4m more liquid assets than total liabilities.

This luscious liquidity implies that PPS International (Holdings)'s balance sheet is sturdy like a giant sequoia tree. On this view, lenders should feel as safe as the beloved of a black-belt karate master. Simply put, the fact that PPS International (Holdings) has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for PPS International (Holdings)

Also positive, PPS International (Holdings) grew its EBIT by 22% in the last year, and that should make it easier to pay down debt, going forward. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since PPS International (Holdings) will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While PPS International (Holdings) has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last three years, PPS International (Holdings) actually produced more free cash flow than EBIT. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.

Summing Up

While it is always sensible to investigate a company's debt, in this case PPS International (Holdings) has HK$94.3m in net cash and a strong balance sheet. The cherry on top was that in converted 282% of that EBIT to free cash flow, bringing in HK$11m. The bottom line is that PPS International (Holdings)'s use of debt is absolutely fine. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 1 warning sign for PPS International (Holdings) that you should be aware of before investing here.

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.