Is Mr D.I.Y. Group (M) Berhad (KLSE:MRDIY) A Risky Investment?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 Mr D.I.Y. Group (M) Berhad (KLSE:MRDIY) does use debt in its business. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Mr D.I.Y. Group (M) Berhad Carry?

As you can see below, Mr D.I.Y. Group (M) Berhad had RM32.0m of debt at June 2025, down from RM195.1m a year prior. However, it does have RM320.0m in cash offsetting this, leading to net cash of RM288.0m.

How Strong Is Mr D.I.Y. Group (M) Berhad's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Mr D.I.Y. Group (M) Berhad had liabilities of RM715.0m due within 12 months and liabilities of RM1.21b due beyond that. Offsetting this, it had RM320.0m in cash and RM142.4m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by RM1.47b.

Since publicly traded Mr D.I.Y. Group (M) Berhad shares are worth a total of RM15.3b, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, Mr D.I.Y. Group (M) Berhad boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Mr D.I.Y. Group (M) Berhad

The good news is that Mr D.I.Y. Group (M) Berhad has increased its EBIT by 3.1% over twelve months, which should ease any concerns about debt repayment. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Mr D.I.Y. Group (M) Berhad can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Mr D.I.Y. Group (M) Berhad may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last three years, Mr D.I.Y. Group (M) Berhad recorded free cash flow worth a fulsome 81% of its EBIT, which is stronger than we'd usually expect. That positions it well to pay down debt if desirable to do so.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that Mr D.I.Y. Group (M) Berhad has RM288.0m in net cash. And it impressed us with free cash flow of RM917m, being 81% of its EBIT. So we don't think Mr D.I.Y. Group (M) Berhad's use of debt is risky. 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. Be aware that Mr D.I.Y. Group (M) Berhad is showing 1 warning sign in our investment analysis , you should know about...

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.