Is Jentayu Sustainables Berhad (KLSE:JSB) Using Too Much Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Jentayu Sustainables Berhad (KLSE:JSB) makes use of debt. But should shareholders be worried about its use of debt?

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When Is Debt A Problem?

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. 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 Jentayu Sustainables Berhad's Debt?

The image below, which you can click on for greater detail, shows that at September 2025 Jentayu Sustainables Berhad had debt of RM18.7m, up from RM13.9m in one year. However, because it has a cash reserve of RM1.00m, its net debt is less, at about RM17.7m.

How Healthy Is Jentayu Sustainables Berhad's Balance Sheet?

According to the last reported balance sheet, Jentayu Sustainables Berhad had liabilities of RM41.7m due within 12 months, and liabilities of RM18.2m due beyond 12 months. Offsetting these obligations, it had cash of RM1.00m as well as receivables valued at RM24.1m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by RM34.8m.

This deficit isn't so bad because Jentayu Sustainables Berhad is worth RM156.5m, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. There's no doubt that we learn most about debt from the balance sheet. But it is Jentayu Sustainables 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.

View our latest analysis for Jentayu Sustainables Berhad

In the last year Jentayu Sustainables Berhad's revenue was pretty flat, and it made a negative EBIT. While that hardly impresses, its not too bad either.

Caveat Emptor

Over the last twelve months Jentayu Sustainables Berhad produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable RM34m 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. Another cause for caution is that is bled RM30m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 5 warning signs for Jentayu Sustainables Berhad (3 shouldn't be ignored) you should be aware of.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.