Sealink International Berhad (KLSE:SEALINK) Has Debt But No Earnings; Should You Worry?

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 seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that Sealink International Berhad (KLSE:SEALINK) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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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. If things get really bad, the lenders can take control of the business. 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. 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.

How Much Debt Does Sealink International Berhad Carry?

As you can see below, Sealink International Berhad had RM36.0m of debt at June 2025, down from RM38.1m a year prior. But on the other hand it also has RM43.7m in cash, leading to a RM7.68m net cash position.

How Strong Is Sealink International Berhad's Balance Sheet?

According to the last reported balance sheet, Sealink International Berhad had liabilities of RM109.4m due within 12 months, and liabilities of RM16.8m due beyond 12 months. Offsetting these obligations, it had cash of RM43.7m as well as receivables valued at RM76.3m due within 12 months. So it has liabilities totalling RM6.23m more than its cash and near-term receivables, combined.

Given Sealink International Berhad has a market capitalization of RM90.0m, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. While it does have liabilities worth noting, Sealink International Berhad also has more cash than debt, so we're pretty confident it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is Sealink International Berhad's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Sealink International Berhad

In the last year Sealink International Berhad wasn't profitable at an EBIT level, but managed to grow its revenue by 15%, to RM139m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is Sealink International Berhad?

While Sealink International Berhad lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow RM18m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. Until we see some positive EBIT, we're a bit cautious of the stock, not least because of the rather modest revenue growth. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 2 warning signs for Sealink International Berhad 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.