Is DGB Asia Berhad (KLSE:DGB) A Risky Investment?

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.' 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. Importantly, DGB Asia Berhad (KLSE:DGB) does carry debt. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

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. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is DGB Asia Berhad's Debt?

The chart below, which you can click on for greater detail, shows that DGB Asia Berhad had RM9.52m in debt in September 2025; about the same as the year before. But it also has RM34.0m in cash to offset that, meaning it has RM24.5m net cash.

How Strong Is DGB Asia Berhad's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that DGB Asia Berhad had liabilities of RM28.2m due within 12 months and liabilities of RM93.3m due beyond that. Offsetting these obligations, it had cash of RM34.0m as well as receivables valued at RM50.1m due within 12 months. So its liabilities total RM37.3m more than the combination of its cash and short-term receivables.

The deficiency here weighs heavily on the RM11.6m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we definitely think shareholders need to watch this one closely. After all, DGB Asia Berhad would likely require a major re-capitalisation if it had to pay its creditors today. DGB Asia Berhad boasts net cash, so it's fair to say it does not have a heavy debt load, even if it does have very significant liabilities, in total. There's no doubt that we learn most about debt from the balance sheet. But it is DGB Asia 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.

View our latest analysis for DGB Asia Berhad

Over 12 months, DGB Asia Berhad saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that's not too bad, we'd prefer see growth.

So How Risky Is DGB Asia Berhad?

Although DGB Asia Berhad had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of RM10m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. Given the lack of transparency around future revenue (and cashflow), we're nervous about this one, until it makes its first big sales. To us, it is a high risk play. 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. To that end, you should be aware of the 2 warning signs we've spotted with DGB Asia Berhad .

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.