Is Sinostar PEC Holdings (SGX:C9Q) Using Too Much Debt?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 can see that Sinostar PEC Holdings Limited (SGX:C9Q) does use debt in its business. But should shareholders be worried about its use of debt?Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. 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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together. What Is Sinostar PEC Holdings's Net Debt? As you can see below, Sinostar PEC Holdings had CN¥250.0m of debt at September 2025, down from CN¥430.0m a year prior. However, it does have CN¥433.3m in cash offsetting this, leading to net cash of CN¥183.3m. SGX:C9Q Debt to Equity History January 19th 2026 How Strong Is Sinostar PEC Holdings' Balance Sheet? We can see from the most recent balance sheet that Sinostar PEC Holdings had liabilities of CN¥334.2m falling due within a year, and liabilities of CN¥153.5m due beyond that. Offsetting this, it had CN¥433.3m in cash and CN¥80.6m in receivables that were due within 12 months. So it actually has CN¥26.3m more liquid assets than total liabilities. This short term liquidity is a sign that Sinostar PEC Holdings could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Sinostar PEC Holdings boasts net cash, so it's fair to say it does not have a heavy debt load! Check out our latest analysis for Sinostar PEC Holdings It is just as well that Sinostar PEC Holdings's load is not too heavy, because its EBIT was down 73% over the last year. When a company sees its earnings tank, it can sometimes find its relationships with its lenders turn sour. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Sinostar PEC 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. But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Sinostar PEC Holdings may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last three years, Sinostar PEC Holdings actually produced more free cash flow than EBIT. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert. Summing Up While it is always sensible to investigate a company's debt, in this case Sinostar PEC Holdings has CN¥183.3m in net cash and a decent-looking balance sheet. The cherry on top was that in converted 102% of that EBIT to free cash flow, bringing in -CN¥77m. So we are not troubled with Sinostar PEC Holdings's debt use. 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 Sinostar PEC Holdings (at least 2 which are a bit concerning) , and understanding them should be part of your investment process. If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.