Hextar Technologies Solutions Berhad (KLSE:HEXTECH) Is Carrying A Fair Bit Of Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies Hextar Technologies Solutions Berhad (KLSE:HEXTECH) makes use of debt. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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 Hextar Technologies Solutions Berhad's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of December 2024 Hextar Technologies Solutions Berhad had RM20.9m of debt, an increase on RM13.3m, over one year. However, it does have RM9.34m in cash offsetting this, leading to net debt of about RM11.6m.

How Healthy Is Hextar Technologies Solutions Berhad's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Hextar Technologies Solutions Berhad had liabilities of RM43.7m due within 12 months and liabilities of RM16.4m due beyond that. On the other hand, it had cash of RM9.34m and RM78.6m worth of receivables due within a year. So it actually has RM27.8m more liquid assets than total liabilities.

Having regard to Hextar Technologies Solutions Berhad's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the RM2.31b company is struggling for cash, we still think it's worth monitoring its balance sheet. Carrying virtually no net debt, Hextar Technologies Solutions Berhad has a very light debt load indeed. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Hextar Technologies Solutions Berhad will need earnings to service that debt. 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 Hextar Technologies Solutions Berhad

In the last year Hextar Technologies Solutions Berhad had a loss before interest and tax, and actually shrunk its revenue by 11%, to RM175m. We would much prefer see growth.

Caveat Emptor

Not only did Hextar Technologies Solutions Berhad's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). To be specific the EBIT loss came in at RM19m. Looking on the brighter side, the business has adequate liquid assets, which give it time to grow and develop before its debt becomes a near-term issue. But we'd want to see some positive free cashflow before spending much time on trying to understand the stock. This one is a bit too risky for our liking. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 1 warning sign for Hextar Technologies Solutions Berhad you should be aware of.

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.

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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.