Does Komarkcorp Berhad (KLSE:KOMARK) Have A Healthy Balance Sheet?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Komarkcorp Berhad (KLSE:KOMARK) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. When we think about a company's use of debt, we first look at cash and debt together.

What Is Komarkcorp Berhad's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Komarkcorp Berhad had debt of RM11.7m, up from RM9.32m in one year. However, its balance sheet shows it holds RM22.2m in cash, so it actually has RM10.5m net cash.

A Look At Komarkcorp Berhad's Liabilities

Zooming in on the latest balance sheet data, we can see that Komarkcorp Berhad had liabilities of RM21.6m due within 12 months and liabilities of RM8.24m due beyond that. Offsetting this, it had RM22.2m in cash and RM5.22m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by RM2.46m.

Of course, Komarkcorp Berhad has a market capitalization of RM12.7m, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Despite its noteworthy liabilities, Komarkcorp Berhad boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Komarkcorp Berhad will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for Komarkcorp Berhad

Over 12 months, Komarkcorp Berhad made a loss at the EBIT level, and saw its revenue drop to RM20m, which is a fall of 15%. We would much prefer see growth.

So How Risky Is Komarkcorp Berhad?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Komarkcorp Berhad had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through RM894k of cash and made a loss of RM24m. While this does make the company a bit risky, it's important to remember it has net cash of RM10.5m. That means it could keep spending at its current rate for more than two years. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 4 warning signs we've spotted with Komarkcorp Berhad (including 3 which can't be ignored) .

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.