We Think Vinvest Capital Holdings Berhad (KLSE:VINVEST) 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.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Vinvest Capital Holdings Berhad (KLSE:VINVEST) does use debt in its business. But the real question is whether this debt is making the company risky.

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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 Vinvest Capital Holdings Berhad Carry?

The image below, which you can click on for greater detail, shows that Vinvest Capital Holdings Berhad had debt of RM12.8m at the end of June 2025, a reduction from RM33.2m over a year. However, it also had RM9.80m in cash, and so its net debt is RM3.03m.

How Healthy Is Vinvest Capital Holdings Berhad's Balance Sheet?

The latest balance sheet data shows that Vinvest Capital Holdings Berhad had liabilities of RM40.8m due within a year, and liabilities of RM4.80m falling due after that. On the other hand, it had cash of RM9.80m and RM113.6m worth of receivables due within a year. So it actually has RM77.9m more liquid assets than total liabilities.

This surplus strongly suggests that Vinvest Capital Holdings 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.

View our latest analysis for Vinvest Capital Holdings Berhad

In order to size up a company's debt relative to its earnings, we calculate its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and its earnings before interest and tax (EBIT) divided by its interest expense (its interest cover). The advantage of this approach is that we take into account both the absolute quantum of debt (with net debt to EBITDA) and the actual interest expenses associated with that debt (with its interest cover ratio).

While Vinvest Capital Holdings Berhad's low debt to EBITDA ratio of 0.94 suggests only modest use of debt, the fact that EBIT only covered the interest expense by 3.1 times last year does give us pause. So we'd recommend keeping a close eye on the impact financing costs are having on the business. Notably, Vinvest Capital Holdings Berhad made a loss at the EBIT level, last year, but improved that to positive EBIT of RM2.3m in the last twelve months. There's no doubt that we learn most about debt from the balance sheet. But it is Vinvest Capital Holdings 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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. So it's worth checking how much of the earnings before interest and tax (EBIT) is backed by free cash flow. During the last year, Vinvest Capital Holdings Berhad burned a lot of cash. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its use of debt is more risky.

Our View

Happily, Vinvest Capital Holdings Berhad's impressive level of total liabilities implies it has the upper hand on its debt. But we must concede we find its conversion of EBIT to free cash flow has the opposite effect. All these things considered, it appears that Vinvest Capital Holdings Berhad can comfortably handle its current debt levels. On the plus side, this leverage can boost shareholder returns, but the potential downside is more risk of loss, so it's worth monitoring the balance sheet. 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. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for Vinvest Capital Holdings Berhad 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.