Is GIIB Holdings Berhad (KLSE:GIIB) Using Too Much Debt?

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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, GIIB Holdings Berhad (KLSE:GIIB) does carry debt. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

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 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. When we think about a company's use of debt, we first look at cash and debt together.

What Is GIIB Holdings Berhad's Net Debt?

The image below, which you can click on for greater detail, shows that at March 2025 GIIB Holdings Berhad had debt of RM21.3m, up from RM7.27m in one year. On the flip side, it has RM943.0k in cash leading to net debt of about RM20.4m.

How Strong Is GIIB Holdings Berhad's Balance Sheet?

According to the last reported balance sheet, GIIB Holdings Berhad had liabilities of RM47.4m due within 12 months, and liabilities of RM22.4m due beyond 12 months. On the other hand, it had cash of RM943.0k and RM16.4m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by RM52.5m.

When you consider that this deficiency exceeds the company's RM35.8m market capitalization, you might well be inclined to review the balance sheet intently. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. The balance sheet is clearly the area to focus on when you are analysing debt. But it is GIIB Holdings Berhad's earnings that will influence how the balance sheet holds up in the future. 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 GIIB Holdings Berhad

Over 12 months, GIIB Holdings Berhad made a loss at the EBIT level, and saw its revenue drop to RM47m, which is a fall of 23%. To be frank that doesn't bode well.

Caveat Emptor

While GIIB Holdings Berhad'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 RM28m. Considering that alongside the liabilities mentioned above make us nervous about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it burned through RM18m in negative free cash flow over the last year. 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. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - GIIB Holdings Berhad has 3 warning signs we think 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.

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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.