These 4 Measures Indicate That Mi Technovation Berhad (KLSE:MI) Is Using Debt Reasonably Well

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

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Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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 examine debt levels, we first consider both cash and debt levels, together.

What Is Mi Technovation Berhad's Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Mi Technovation Berhad had RM38.8m of debt, an increase on RM32.4m, over one year. However, it does have RM326.9m in cash offsetting this, leading to net cash of RM288.0m.

How Strong Is Mi Technovation Berhad's Balance Sheet?

The latest balance sheet data shows that Mi Technovation Berhad had liabilities of RM122.5m due within a year, and liabilities of RM39.7m falling due after that. Offsetting this, it had RM326.9m in cash and RM204.2m in receivables that were due within 12 months. So it can boast RM368.8m more liquid assets than total liabilities.

This short term liquidity is a sign that Mi Technovation Berhad could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Mi Technovation Berhad has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for Mi Technovation Berhad

Fortunately, Mi Technovation Berhad grew its EBIT by 9.2% in the last year, making that debt load look even more manageable. 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 Mi Technovation 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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Mi Technovation 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. Looking at the most recent three years, Mi Technovation Berhad recorded free cash flow of 46% of its EBIT, which is weaker than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Mi Technovation Berhad has net cash of RM288.0m, as well as more liquid assets than liabilities. And it also grew its EBIT by 9.2% over the last year. So we don't think Mi Technovation Berhad's use of debt is risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 2 warning signs for Mi Technovation Berhad that you should be aware of before investing here.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.