Is Box-Pak (Malaysia) Bhd (KLSE:BOXPAK) Using Too Much Debt?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. We can see that Box-Pak (Malaysia) Bhd. (KLSE:BOXPAK) does use debt in its business. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

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. 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.

How Much Debt Does Box-Pak (Malaysia) Bhd Carry?

You can click the graphic below for the historical numbers, but it shows that Box-Pak (Malaysia) Bhd had RM217.1m of debt in June 2025, down from RM237.6m, one year before. However, it also had RM18.5m in cash, and so its net debt is RM198.6m.

How Healthy Is Box-Pak (Malaysia) Bhd's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Box-Pak (Malaysia) Bhd had liabilities of RM325.9m due within 12 months and liabilities of RM40.0m due beyond that. Offsetting these obligations, it had cash of RM18.5m as well as receivables valued at RM135.8m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by RM211.6m.

The deficiency here weighs heavily on the RM44.4m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we'd watch its balance sheet closely, without a doubt. After all, Box-Pak (Malaysia) Bhd would likely require a major re-capitalisation if it had to pay its creditors today. There's no doubt that we learn most about debt from the balance sheet. But it is Box-Pak (Malaysia) Bhd'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.

See our latest analysis for Box-Pak (Malaysia) Bhd

In the last year Box-Pak (Malaysia) Bhd's revenue was pretty flat, and it made a negative EBIT. While that hardly impresses, its not too bad either.

Caveat Emptor

Importantly, Box-Pak (Malaysia) Bhd had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping RM6.6m. Combining this information with the significant liabilities we already touched on makes us very hesitant about this stock, to say the least. That said, it is possible that the company will turn its fortunes around. But we think that is unlikely since it is low on liquid assets, and made a loss of RM21m in the last year. So we think this stock is quite risky. We'd prefer to pass. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. To that end, you should learn about the 2 warning signs we've spotted with Box-Pak (Malaysia) Bhd (including 1 which is a bit unpleasant) .

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.