Would Advance Synergy Berhad (KLSE:ASB) Be Better Off With Less Debt?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, '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 Advance Synergy Berhad (KLSE:ASB) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Advance Synergy Berhad's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Advance Synergy Berhad had RM88.1m of debt in June 2025, down from RM127.2m, one year before. However, it does have RM65.4m in cash offsetting this, leading to net debt of about RM22.7m.

A Look At Advance Synergy Berhad's Liabilities

Zooming in on the latest balance sheet data, we can see that Advance Synergy Berhad had liabilities of RM77.9m due within 12 months and liabilities of RM96.0m due beyond that. On the other hand, it had cash of RM65.4m and RM93.1m worth of receivables due within a year. So its liabilities total RM15.4m more than the combination of its cash and short-term receivables.

Of course, Advance Synergy Berhad has a market capitalization of RM151.8m, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. There's no doubt that we learn most about debt from the balance sheet. But it is Advance Synergy Berhad's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for Advance Synergy Berhad

In the last year Advance Synergy Berhad wasn't profitable at an EBIT level, but managed to grow its revenue by 6.6%, to RM279m. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Over the last twelve months Advance Synergy Berhad produced an earnings before interest and tax (EBIT) loss. Indeed, it lost RM5.2m 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. So we think its balance sheet is a little strained, though not beyond repair. We would feel better if it turned its trailing twelve month loss of RM56m into a profit. So in short it's a really risky stock. 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. Case in point: We've spotted 3 warning signs for Advance Synergy Berhad you should be aware of, and 1 of them is significant.

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.

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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.