We're Hopeful That Compugates Holdings Berhad (KLSE:COMPUGT) Will Use Its Cash Wisely

Just because a business does not make any money, does not mean that the stock will go down. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

So should Compugates Holdings Berhad (KLSE:COMPUGT) shareholders be worried about its cash burn? For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Does Compugates Holdings Berhad Have A Long Cash Runway?

A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. As at March 2025, Compugates Holdings Berhad had cash of RM4.7m and no debt. Looking at the last year, the company burnt through RM3.7m. So it had a cash runway of approximately 15 months from March 2025. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. The image below shows how its cash balance has been changing over the last few years.

Check out our latest analysis for Compugates Holdings Berhad

How Well Is Compugates Holdings Berhad Growing?

At first glance it's a bit worrying to see that Compugates Holdings Berhad actually boosted its cash burn by 14%, year on year. The revenue growth of 17% gives a ray of hope, at the very least. Considering the factors above, the company doesn’t fare badly when it comes to assessing how it is changing over time. Of course, we've only taken a quick look at the stock's growth metrics, here. You can take a look at how Compugates Holdings Berhad has developed its business over time by checking this visualization of its revenue and earnings history.

Can Compugates Holdings Berhad Raise More Cash Easily?

Even though it seems like Compugates Holdings Berhad is developing its business nicely, we still like to consider how easily it could raise more money to accelerate growth. Companies can raise capital through either debt or equity. Many companies end up issuing new shares to fund future growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).

Since it has a market capitalisation of RM121m, Compugates Holdings Berhad's RM3.7m in cash burn equates to about 3.0% of its market value. That's a low proportion, so we figure the company would be able to raise more cash to fund growth, with a little dilution, or even to simply borrow some money.

How Risky Is Compugates Holdings Berhad's Cash Burn Situation?

Even though its increasing cash burn makes us a little nervous, we are compelled to mention that we thought Compugates Holdings Berhad's cash burn relative to its market cap was relatively promising. Cash burning companies are always on the riskier side of things, but after considering all of the factors discussed in this short piece, we're not too worried about its rate of cash burn. On another note, Compugates Holdings Berhad has 3 warning signs (and 2 which make us uncomfortable) we think you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies, and this list of stocks growth stocks (according to analyst forecasts)

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.