Greenyield Berhad (KLSE:GREENYB) Is Making Moderate Use Of Debt

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. Importantly, Greenyield Berhad (KLSE:GREENYB) does carry debt. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Greenyield Berhad's Debt?

You can click the graphic below for the historical numbers, but it shows that Greenyield Berhad had RM6.52m of debt in September 2025, down from RM7.60m, one year before. However, it does have RM6.08m in cash offsetting this, leading to net debt of about RM439.0k.

A Look At Greenyield Berhad's Liabilities

The latest balance sheet data shows that Greenyield Berhad had liabilities of RM6.11m due within a year, and liabilities of RM61.8m falling due after that. Offsetting these obligations, it had cash of RM6.08m as well as receivables valued at RM5.29m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by RM56.6m.

This is a mountain of leverage relative to its market capitalization of RM88.7m. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. But either way, Greenyield Berhad has virtually no net debt, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Greenyield 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.

View our latest analysis for Greenyield Berhad

Over 12 months, Greenyield Berhad reported revenue of RM38m, which is a gain of 9.3%, although it did not report any earnings before interest and tax. 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 Greenyield Berhad produced an earnings before interest and tax (EBIT) loss. Indeed, it lost RM4.0m 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. So we think its balance sheet is a little strained, though not beyond repair. We would feel better if it turned its trailing twelve month loss of RM3.7m into a profit. In the meantime, we consider the stock very risky. 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. Case in point: We've spotted 3 warning signs for Greenyield Berhad you should be aware of, and 1 of them is potentially serious.

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.