Is NTPM Holdings Berhad (KLSE:NTPM) Using Too Much Debt?

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. As with many other companies NTPM Holdings Berhad (KLSE:NTPM) makes use of debt. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is NTPM Holdings Berhad's Debt?

As you can see below, at the end of July 2025, NTPM Holdings Berhad had RM391.5m of debt, up from RM357.9m a year ago. Click the image for more detail. On the flip side, it has RM34.2m in cash leading to net debt of about RM357.3m.

How Healthy Is NTPM Holdings Berhad's Balance Sheet?

The latest balance sheet data shows that NTPM Holdings Berhad had liabilities of RM516.0m due within a year, and liabilities of RM54.8m falling due after that. On the other hand, it had cash of RM34.2m and RM249.5m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by RM287.1m.

When you consider that this deficiency exceeds the company's RM275.1m 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. The balance sheet is clearly the area to focus on when you are analysing debt. But it is NTPM 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.

Check out our latest analysis for NTPM Holdings Berhad

In the last year NTPM Holdings Berhad had a loss before interest and tax, and actually shrunk its revenue by 3.4%, to RM875m. We would much prefer see growth.

Caveat Emptor

Over the last twelve months NTPM Holdings Berhad produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at RM4.1m. Considering that alongside the liabilities mentioned above make us nervous about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it burned through RM44m in negative free cash flow over the last year. So suffice it to say we consider the stock to be risky. 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. Case in point: We've spotted 3 warning signs for NTPM Holdings Berhad you should be aware of, and 2 of them are potentially serious.

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.