Is Greatech Technology Berhad (KLSE:GREATEC) A Risky Investment?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. Importantly, Greatech Technology Berhad (KLSE:GREATEC) does carry debt. But the real question is whether this debt is making the company risky.

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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. If things get really bad, the lenders can take control of the business. 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. 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.

What Is Greatech Technology Berhad's Debt?

The image below, which you can click on for greater detail, shows that Greatech Technology Berhad had debt of RM12.5m at the end of March 2025, a reduction from RM13.7m over a year. However, its balance sheet shows it holds RM230.6m in cash, so it actually has RM218.0m net cash.

A Look At Greatech Technology Berhad's Liabilities

The latest balance sheet data shows that Greatech Technology Berhad had liabilities of RM181.0m due within a year, and liabilities of RM33.5m falling due after that. Offsetting this, it had RM230.6m in cash and RM364.1m in receivables that were due within 12 months. So it can boast RM380.2m more liquid assets than total liabilities.

This short term liquidity is a sign that Greatech Technology Berhad could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Greatech Technology Berhad boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Greatech Technology Berhad

In addition to that, we're happy to report that Greatech Technology Berhad has boosted its EBIT by 43%, thus reducing the spectre of future debt repayments. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Greatech Technology Berhad's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Greatech Technology Berhad has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last three years, Greatech Technology Berhad saw substantial negative free cash flow, in total. While that may be a result of expenditure for growth, it does make the debt far more risky.

Summing Up

While it is always sensible to investigate a company's debt, in this case Greatech Technology Berhad has RM218.0m in net cash and a decent-looking balance sheet. And it impressed us with its EBIT growth of 43% over the last year. So we are not troubled with Greatech Technology Berhad's debt use. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 2 warning signs with Greatech Technology Berhad (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

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.