Is Pan Malaysia Corporation Berhad (KLSE:PMCORP) A Risky Investment?

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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Pan Malaysia Corporation Berhad (KLSE:PMCORP) does carry debt. But is this debt a concern to shareholders?

When Is Debt A Problem?

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. If things get really bad, the lenders can take control of the business. 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. 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 examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for Pan Malaysia Corporation Berhad

What Is Pan Malaysia Corporation Berhad's Debt?

The image below, which you can click on for greater detail, shows that at June 2022 Pan Malaysia Corporation Berhad had debt of RM26.8m, up from RM389.0k in one year. However, its balance sheet shows it holds RM63.7m in cash, so it actually has RM36.9m net cash.

How Strong Is Pan Malaysia Corporation Berhad's Balance Sheet?

We can see from the most recent balance sheet that Pan Malaysia Corporation Berhad had liabilities of RM70.6m falling due within a year, and liabilities of RM40.7m due beyond that. On the other hand, it had cash of RM63.7m and RM28.2m worth of receivables due within a year. So its liabilities total RM19.4m more than the combination of its cash and short-term receivables.

Of course, Pan Malaysia Corporation Berhad has a market capitalization of RM150.4m, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, Pan Malaysia Corporation Berhad boasts net cash, 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 it is Pan Malaysia Corporation 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.

In the last year Pan Malaysia Corporation Berhad wasn't profitable at an EBIT level, but managed to grow its revenue by 206%, to RM106m. That's virtually the hole-in-one of revenue growth!

So How Risky Is Pan Malaysia Corporation Berhad?

While Pan Malaysia Corporation Berhad lost money on an earnings before interest and tax (EBIT) level, it actually booked a paper profit of RM2.6m. So taking that on face value, and considering the cash, we don't think its very risky in the near term. The good news for Pan Malaysia Corporation Berhad shareholders is that its revenue growth is strong, making it easier to raise capital if need be. But we still think it's somewhat risky. 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 3 warning signs we've spotted with Pan Malaysia Corporation Berhad (including 1 which is concerning) .

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.