Does Unique Fire Holdings Berhad (KLSE:UNIQUE) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 Unique Fire Holdings Berhad (KLSE:UNIQUE) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

What Is Unique Fire Holdings Berhad's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Unique Fire Holdings Berhad had RM8.02m of debt in March 2025, down from RM9.40m, one year before. However, it does have RM21.1m in cash offsetting this, leading to net cash of RM13.1m.

A Look At Unique Fire Holdings Berhad's Liabilities

We can see from the most recent balance sheet that Unique Fire Holdings Berhad had liabilities of RM9.95m falling due within a year, and liabilities of RM7.49m due beyond that. Offsetting these obligations, it had cash of RM21.1m as well as receivables valued at RM25.9m due within 12 months. So it can boast RM29.5m more liquid assets than total liabilities.

It's good to see that Unique Fire Holdings Berhad has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Due to its strong net asset position, it is not likely to face issues with its lenders. Simply put, the fact that Unique Fire Holdings Berhad has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for Unique Fire Holdings Berhad

And we also note warmly that Unique Fire Holdings Berhad grew its EBIT by 20% last year, making its debt load easier to handle. When analysing debt levels, the balance sheet is the obvious place to start. But it is Unique Fire 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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Unique Fire Holdings Berhad has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Looking at the most recent three years, Unique Fire Holdings Berhad recorded free cash flow of 46% of its EBIT, which is weaker than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.

Summing Up

While it is always sensible to investigate a company's debt, in this case Unique Fire Holdings Berhad has RM13.1m in net cash and a decent-looking balance sheet. And it impressed us with its EBIT growth of 20% over the last year. So we don't think Unique Fire Holdings Berhad's use of debt is risky. 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. We've identified 2 warning signs with Unique Fire Holdings Berhad , and understanding them should be part of your investment process.

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.