Swift Energy Technology Berhad (KLSE:SET) Seems To Use Debt Quite Sensibly

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. We can see that Swift Energy Technology Berhad (KLSE:SET) does use debt in its business. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

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. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Swift Energy Technology Berhad Carry?

As you can see below, Swift Energy Technology Berhad had RM13.4m of debt at June 2025, down from RM31.2m a year prior. However, it does have RM70.0m in cash offsetting this, leading to net cash of RM56.7m.

How Healthy Is Swift Energy Technology Berhad's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Swift Energy Technology Berhad had liabilities of RM26.5m due within 12 months and liabilities of RM9.18m due beyond that. On the other hand, it had cash of RM70.0m and RM59.2m worth of receivables due within a year. So it can boast RM93.5m more liquid assets than total liabilities.

This surplus strongly suggests that Swift Energy Technology Berhad has a rock-solid balance sheet (and the debt is of no concern whatsoever). On this view, lenders should feel as safe as the beloved of a black-belt karate master. Succinctly put, Swift Energy Technology Berhad boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Swift Energy Technology Berhad

But the bad news is that Swift Energy Technology Berhad has seen its EBIT plunge 16% in the last twelve months. We think hat kind of performance, if repeated frequently, could well lead to difficulties for the stock. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Swift Energy Technology Berhad can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Swift Energy Technology 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, Swift Energy Technology Berhad created free cash flow amounting to 14% of its EBIT, an uninspiring performance. That limp level of cash conversion undermines its ability to manage and pay down debt.

Summing Up

While it is always sensible to investigate a company's debt, in this case Swift Energy Technology Berhad has RM56.7m in net cash and a decent-looking balance sheet. So we are not troubled with Swift Energy Technology Berhad's debt use. 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. Be aware that Swift Energy Technology Berhad is showing 2 warning signs in our investment analysis , you should know about...

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.