Is Maxland Berhad (KLSE:MAXLAND) Weighed On By Its Debt Load?

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. As with many other companies Maxland Berhad (KLSE:MAXLAND) makes use of debt. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest 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.

How Much Debt Does Maxland Berhad Carry?

As you can see below, Maxland Berhad had RM17.4m of debt at March 2025, down from RM76.9m a year prior. However, it also had RM746.0k in cash, and so its net debt is RM16.7m.

A Look At Maxland Berhad's Liabilities

We can see from the most recent balance sheet that Maxland Berhad had liabilities of RM140.4m falling due within a year, and liabilities of RM19.1m due beyond that. Offsetting this, it had RM746.0k in cash and RM33.6m in receivables that were due within 12 months. So it has liabilities totalling RM125.1m more than its cash and near-term receivables, combined.

This deficit casts a shadow over the RM56.1m company, like a colossus towering over mere mortals. So we definitely think shareholders need to watch this one closely. After all, Maxland Berhad 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 Maxland 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.

See our latest analysis for Maxland Berhad

In the last year Maxland Berhad's revenue was pretty flat, and it made a negative EBIT. While that's not too bad, we'd prefer see growth.

Caveat Emptor

Importantly, Maxland Berhad had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost a very considerable RM37m at the EBIT level. When we look at that alongside the significant liabilities, we're not particularly confident about the company. We'd want to see some strong near-term improvements before getting too interested in the stock. For example, we would not want to see a repeat of last year's loss of RM71m. And until that time we think this is a risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example Maxland Berhad has 2 warning signs (and 1 which can't be ignored) we think you should know about.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.