Is Focus Dynamics Group Berhad (KLSE:FOCUS) Using Too Much 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 Focus Dynamics Group Berhad (KLSE:FOCUS) makes use of debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. If things get really bad, the lenders can take control of the business. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Focus Dynamics Group Berhad Carry?

As you can see below, Focus Dynamics Group Berhad had RM11.2m of debt, at March 2025, which is about the same as the year before. You can click the chart for greater detail. However, it does have RM6.39m in cash offsetting this, leading to net debt of about RM4.81m.

How Healthy Is Focus Dynamics Group Berhad's Balance Sheet?

The latest balance sheet data shows that Focus Dynamics Group Berhad had liabilities of RM87.5m due within a year, and liabilities of RM43.9m falling due after that. Offsetting these obligations, it had cash of RM6.39m as well as receivables valued at RM24.6m due within 12 months. So it has liabilities totalling RM100.4m more than its cash and near-term receivables, combined.

When you consider that this deficiency exceeds the company's RM95.6m market capitalization, you might well be inclined to review the balance sheet intently. Hypothetically, extremely heavy dilution would be required if the company were forced to pay down its liabilities by raising capital at the current share price. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Focus Dynamics Group Berhad will need earnings to service that debt. 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 Focus Dynamics Group Berhad

In the last year Focus Dynamics Group Berhad had a loss before interest and tax, and actually shrunk its revenue by 12%, to RM78m. That's not what we would hope to see.

Caveat Emptor

While Focus Dynamics Group Berhad's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. To be specific the EBIT loss came in at RM2.3m. Considering that alongside the liabilities mentioned above make us nervous about the company. We'd want to see some strong near-term improvements before getting too interested in the stock. It's fair to say the loss of RM5.2m didn't encourage us either; we'd like to see a profit. And until that time we think this is a risky stock. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Focus Dynamics Group Berhad (of which 2 can't be ignored!) you should know about.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.