Is One Media Group (HKG: 426) a risky investment?

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David Iben put it well when he said: “Volatility is not a risk we care about. What matters to us is to avoid the permanent loss of capital. ‘ So it can be obvious that you need to consider debt, when you think about how risky a given stock is, because too much debt can sink a business. Above all, A limited media group (HKG: 426) carries a debt. But the most important question is: what risk does this debt create?

What risk does debt entail?

Debts and other liabilities become risky for a business when it cannot easily meet these obligations, either with free cash flow or by raising capital at an attractive price. If things really go wrong, lenders can take over the business. However, a more common (but still painful) scenario is that he must raise new equity at low cost, thereby diluting shareholders over the long term. That said, the most common situation is where a business manages its debt reasonably well – and to its own advantage. When we look at debt levels, we first consider both liquidity and debt levels.

Check out our latest analysis for One Media Group

How much debt does a media group carry?

The image below, which you can click for more details, shows that as of June 2021, One Media Group was in debt of HK $ 115 million, up from HK $ 6.51 million in one year. On the other hand, he has HK $ 111.6million in cash, resulting in net debt of around HK $ 3.37million.

SEHK: 426 History of debt to equity September 21, 2021

How healthy is One Media Group’s balance sheet?

According to the latest published balance sheet, One Media Group had a liability of HK $ 12.1 million due within 12 months and a liability of HK $ 115.1 million due beyond 12 months. In return, he had HK $ 111.6 million in cash and HK $ 8.54 million in receivables due within 12 months. Thus, its liabilities exceed the sum of its cash and (short-term) receivables by HK $ 6.99 million.

Considering that One Media Group has a market capitalization of HK $ 72.2 million, it is hard to believe that these liabilities pose a significant threat. Having said that, it is clear that we must continue to monitor his record lest it get worse. The balance sheet is clearly the area you need to focus on when analyzing debt. But you can’t look at debt in isolation; since One Media Group will need revenue to repay this debt. So if you want to know more about its profits, it might be worth checking out this long term profit trend chart.

Over 12 months, One Media Group recorded a loss in EBIT level and saw its revenue fall to HK $ 46 million, a decrease of 26%. To be frank, that doesn’t bode well.

Emptor Warning

While One Media Group’s declining revenue is about as comforting as a wet blanket, its earnings before interest and taxes (EBIT) can be said to be even less attractive. Its EBIT loss was HK $ 25 million. Considering that besides the liabilities mentioned above, we are not convinced that the company should use so much debt. Quite frankly, we think the record is far from up to par, although it could improve over time. However, it doesn’t help that he spent HK $ 21million in cash in the past year. Suffice it to say, then, that we consider the stock to be very risky. There is no doubt that we learn the most about debt from the balance sheet. But at the end of the day, every business can contain risks that exist off the balance sheet. Note that One Media Group displays 2 warning signs in our investment analysis , and 1 of them is significant …

At the end of the day, sometimes it’s easier to focus on businesses that don’t even need to go into debt. Readers can access a list of growth stocks with zero net debt 100% free, at present.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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