Is Genetec Technology Berhad (KLSE:GENETEC) 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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that Genetec Technology Berhad (KLSE:GENETEC) does use debt in its business. But the real question is whether this debt is making the company risky.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. 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.

What Is Genetec Technology Berhad's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Genetec Technology Berhad had debt of RM29.0m, up from RM14.8m in one year. However, its balance sheet shows it holds RM44.0m in cash, so it actually has RM15.1m net cash.

How Strong Is Genetec Technology Berhad's Balance Sheet?

The latest balance sheet data shows that Genetec Technology Berhad had liabilities of RM84.6m due within a year, and liabilities of RM1.14m falling due after that. Offsetting these obligations, it had cash of RM44.0m as well as receivables valued at RM327.3m due within 12 months. So it actually has RM285.6m more liquid assets than total liabilities.

This surplus strongly suggests that Genetec Technology Berhad has a rock-solid balance sheet (and the debt is of no concern whatsoever). With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Succinctly put, Genetec Technology Berhad boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Genetec Technology Berhad's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

View our latest analysis for Genetec Technology Berhad

Over 12 months, Genetec Technology Berhad made a loss at the EBIT level, and saw its revenue drop to RM223m, which is a fall of 20%. That's not what we would hope to see.

So How Risky Is Genetec Technology Berhad?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And in the last year Genetec Technology Berhad had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of RM124m and booked a RM34m accounting loss. With only RM15.1m on the balance sheet, it would appear that its going to need to raise capital again soon. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 2 warning signs with Genetec Technology Berhad , and understanding them should be part of your investment process.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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.