Jati Tinggi Group Berhad (KLSE:JTGROUP) Has A Somewhat Strained Balance Sheet

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 Jati Tinggi Group Berhad (KLSE:JTGROUP) makes use of debt. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. If things get really bad, the lenders can take control of the business. 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 examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Jati Tinggi Group Berhad Carry?

The image below, which you can click on for greater detail, shows that at May 2025 Jati Tinggi Group Berhad had debt of RM19.0m, up from RM14.8m in one year. However, it does have RM26.7m in cash offsetting this, leading to net cash of RM7.70m.

How Healthy Is Jati Tinggi Group Berhad's Balance Sheet?

The latest balance sheet data shows that Jati Tinggi Group Berhad had liabilities of RM56.9m due within a year, and liabilities of RM1.15m falling due after that. Offsetting this, it had RM26.7m in cash and RM96.8m in receivables that were due within 12 months. So it actually has RM65.5m more liquid assets than total liabilities.

This luscious liquidity implies that Jati Tinggi Group Berhad's balance sheet is sturdy like a giant sequoia tree. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Simply put, the fact that Jati Tinggi Group Berhad has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for Jati Tinggi Group Berhad

Shareholders should be aware that Jati Tinggi Group Berhad's EBIT was down 39% last year. If that earnings trend continues then paying off its debt will be about as easy as herding cats on to a roller coaster. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Jati Tinggi Group 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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Jati Tinggi Group Berhad has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last three years, Jati Tinggi Group Berhad saw substantial negative free cash flow, in total. While that may be a result of expenditure for growth, it does make the debt far more risky.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Jati Tinggi Group Berhad has net cash of RM7.70m, as well as more liquid assets than liabilities. So while Jati Tinggi Group Berhad does not have a great balance sheet, it's certainly not too bad. 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 Jati Tinggi Group Berhad (2 are potentially serious) 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.