Is Toyo Ventures Holdings Berhad (KLSE:TOYOVEN) A Risky Investment?

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.' 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 note that Toyo Ventures Holdings Berhad (KLSE:TOYOVEN) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. If things get really bad, the lenders can take control of the business. 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 think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Toyo Ventures Holdings Berhad Carry?

As you can see below, at the end of March 2025, Toyo Ventures Holdings Berhad had RM12.8m of debt, up from RM9.95m a year ago. Click the image for more detail. However, its balance sheet shows it holds RM80.4m in cash, so it actually has RM67.6m net cash.

How Healthy Is Toyo Ventures Holdings Berhad's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Toyo Ventures Holdings Berhad had liabilities of RM28.8m due within 12 months and liabilities of RM207.0m due beyond that. On the other hand, it had cash of RM80.4m and RM20.5m worth of receivables due within a year. So it has liabilities totalling RM134.9m more than its cash and near-term receivables, combined.

This deficit casts a shadow over the RM56.4m company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. After all, Toyo Ventures Holdings Berhad would likely require a major re-capitalisation if it had to pay its creditors today. Given that Toyo Ventures Holdings Berhad has more cash than debt, we're pretty confident it can handle its debt, despite the fact that it has a lot of liabilities in total. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Toyo Ventures Holdings Berhad will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

See our latest analysis for Toyo Ventures Holdings Berhad

Over 12 months, Toyo Ventures Holdings Berhad reported revenue of RM86m, which is a gain of 7.2%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is Toyo Ventures Holdings Berhad?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Toyo Ventures Holdings Berhad had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through RM7.9m of cash and made a loss of RM304m. While this does make the company a bit risky, it's important to remember it has net cash of RM67.6m. That means it could keep spending at its current rate for more than two years. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. 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 Toyo Ventures Holdings Berhad has 5 warning signs (and 2 which don't sit too well with us) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.