We Think Wong Engineering Corporation Berhad (KLSE:WONG) Has A Fair Chunk Of Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the 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. As with many other companies Wong Engineering Corporation Berhad (KLSE:WONG) makes use of debt. But the real question is whether this debt is making the company risky.

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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. 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, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Wong Engineering Corporation Berhad's Debt?

You can click the graphic below for the historical numbers, but it shows that Wong Engineering Corporation Berhad had RM36.1m of debt in July 2025, down from RM40.8m, one year before. However, it does have RM9.88m in cash offsetting this, leading to net debt of about RM26.3m.

A Look At Wong Engineering Corporation Berhad's Liabilities

The latest balance sheet data shows that Wong Engineering Corporation Berhad had liabilities of RM23.7m due within a year, and liabilities of RM27.1m falling due after that. On the other hand, it had cash of RM9.88m and RM13.6m worth of receivables due within a year. So its liabilities total RM27.3m more than the combination of its cash and short-term receivables.

This deficit is considerable relative to its market capitalization of RM42.5m, so it does suggest shareholders should keep an eye on Wong Engineering Corporation Berhad's use of debt. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. There's no doubt that we learn most about debt from the balance sheet. But it is Wong Engineering Corporation Berhad's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

See our latest analysis for Wong Engineering Corporation Berhad

In the last year Wong Engineering Corporation Berhad wasn't profitable at an EBIT level, but managed to grow its revenue by 7.4%, to RM42m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Over the last twelve months Wong Engineering Corporation Berhad produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable RM8.5m at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled RM3.0m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. 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 Wong Engineering Corporation Berhad is showing 4 warning signs in our investment analysis , and 2 of those shouldn't be ignored...

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.