AIZO Group Berhad (KLSE:AIZO) Is Carrying A Fair Bit Of Debt

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that AIZO Group Berhad (KLSE:AIZO) does use debt in its business. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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.

What Is AIZO Group Berhad's Debt?

As you can see below, AIZO Group Berhad had RM36.5m of debt, at June 2025, which is about the same as the year before. You can click the chart for greater detail. However, it does have RM20.8m in cash offsetting this, leading to net debt of about RM15.7m.

A Look At AIZO Group Berhad's Liabilities

We can see from the most recent balance sheet that AIZO Group Berhad had liabilities of RM67.6m falling due within a year, and liabilities of RM35.3m due beyond that. On the other hand, it had cash of RM20.8m and RM43.7m worth of receivables due within a year. So its liabilities total RM38.3m more than the combination of its cash and short-term receivables.

This deficit isn't so bad because AIZO Group Berhad is worth RM137.4m, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. The balance sheet is clearly the area to focus on when you are analysing debt. But it is AIZO Group 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 AIZO Group Berhad

Over 12 months, AIZO Group Berhad made a loss at the EBIT level, and saw its revenue drop to RM126m, which is a fall of 3.0%. That's not what we would hope to see.

Caveat Emptor

Importantly, AIZO Group Berhad had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost RM10m 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. However, it doesn't help that it burned through RM18m of cash over the last year. So suffice it to say 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. Be aware that AIZO Group Berhad is showing 3 warning signs in our investment analysis , and 2 of those are a bit unpleasant...

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.