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SIMMTECH (KOSDAQ:222800) Is Making Moderate Use Of Debt

Simply Wall St · 4d ago

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says '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 SIMMTECH Co., Ltd. (KOSDAQ:222800) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is SIMMTECH's Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 SIMMTECH had ₩547.2b of debt, an increase on ₩520.0b, over one year. However, because it has a cash reserve of ₩25.1b, its net debt is less, at about ₩522.1b.

debt-equity-history-analysis
KOSDAQ:A222800 Debt to Equity History January 8th 2026

How Healthy Is SIMMTECH's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that SIMMTECH had liabilities of ₩810.2b due within 12 months and liabilities of ₩202.9b due beyond that. On the other hand, it had cash of ₩25.1b and ₩433.8b worth of receivables due within a year. So it has liabilities totalling ₩554.2b more than its cash and near-term receivables, combined.

SIMMTECH has a market capitalization of ₩1.63t, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine SIMMTECH's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

See our latest analysis for SIMMTECH

Over 12 months, SIMMTECH reported revenue of ₩1.3t, which is a gain of 7.4%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Over the last twelve months SIMMTECH produced an earnings before interest and tax (EBIT) loss. Indeed, it lost ₩36b at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled ₩212b in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. We've identified 3 warning signs with SIMMTECH (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.