Is ECA Integrated Solution Berhad (KLSE:ECA) A Risky Investment?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. As with many other companies ECA Integrated Solution Berhad (KLSE:ECA) makes use of debt. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

What Is ECA Integrated Solution Berhad's Debt?

As you can see below, at the end of July 2025, ECA Integrated Solution Berhad had RM15.4m of debt, up from RM9.05m a year ago. Click the image for more detail. But it also has RM24.9m in cash to offset that, meaning it has RM9.50m net cash.

How Strong Is ECA Integrated Solution Berhad's Balance Sheet?

We can see from the most recent balance sheet that ECA Integrated Solution Berhad had liabilities of RM13.3m falling due within a year, and liabilities of RM10.7m due beyond that. Offsetting these obligations, it had cash of RM24.9m as well as receivables valued at RM8.85m due within 12 months. So it actually has RM9.66m more liquid assets than total liabilities.

This short term liquidity is a sign that ECA Integrated Solution Berhad could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that ECA Integrated Solution Berhad has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since ECA Integrated Solution Berhad 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.

See our latest analysis for ECA Integrated Solution Berhad

In the last year ECA Integrated Solution Berhad had a loss before interest and tax, and actually shrunk its revenue by 17%, to RM17m. That's not what we would hope to see.

So How Risky Is ECA Integrated Solution Berhad?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that ECA Integrated Solution Berhad had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of RM12m and booked a RM17m accounting loss. But at least it has RM9.50m on the balance sheet to spend on growth, near-term. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 4 warning signs for ECA Integrated Solution Berhad (1 is potentially serious!) that you should be aware of before investing here.

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.