We Think Samaiden Group Berhad (KLSE:SAMAIDEN) Can Stay On Top Of Its 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.' 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 Samaiden Group Berhad (KLSE:SAMAIDEN) makes use of debt. But should shareholders be worried about its use of debt?

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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 frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Samaiden Group Berhad's Debt?

As you can see below, at the end of June 2025, Samaiden Group Berhad had RM107.2m of debt, up from RM8.45m a year ago. Click the image for more detail. However, its balance sheet shows it holds RM182.7m in cash, so it actually has RM75.4m net cash.

A Look At Samaiden Group Berhad's Liabilities

The latest balance sheet data shows that Samaiden Group Berhad had liabilities of RM391.6m due within a year, and liabilities of RM8.24m falling due after that. Offsetting these obligations, it had cash of RM182.7m as well as receivables valued at RM327.9m due within 12 months. So it can boast RM110.7m more liquid assets than total liabilities.

This excess liquidity suggests that Samaiden Group Berhad is taking a careful approach to debt. Due to its strong net asset position, it is not likely to face issues with its lenders. Simply put, the fact that Samaiden Group Berhad has more cash than debt is arguably a good indication that it can manage its debt safely.

See our latest analysis for Samaiden Group Berhad

Also positive, Samaiden Group Berhad grew its EBIT by 21% in the last year, and that should make it easier to pay down debt, going forward. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Samaiden Group Berhad's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. Samaiden Group Berhad may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. In the last three years, Samaiden Group Berhad created free cash flow amounting to 2.2% of its EBIT, an uninspiring performance. That limp level of cash conversion undermines its ability to manage and pay down debt.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Samaiden Group Berhad has net cash of RM75.4m, as well as more liquid assets than liabilities. And it impressed us with its EBIT growth of 21% over the last year. So we don't think Samaiden Group Berhad's use of debt is risky. 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. For example - Samaiden Group Berhad has 1 warning sign we think 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.