Go Hub Capital Berhad (KLSE:GOHUB) Has A Somewhat Strained Balance Sheet

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that Go Hub Capital Berhad (KLSE:GOHUB) does use debt in its business. But should shareholders be worried about its use of debt?

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When Is Debt A Problem?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

What Is Go Hub Capital Berhad's Net Debt?

As you can see below, at the end of June 2025, Go Hub Capital Berhad had RM9.29m of debt, up from RM8.30m a year ago. Click the image for more detail. But on the other hand it also has RM18.7m in cash, leading to a RM9.42m net cash position.

How Strong Is Go Hub Capital Berhad's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Go Hub Capital Berhad had liabilities of RM15.7m due within 12 months and liabilities of RM12.8m due beyond that. On the other hand, it had cash of RM18.7m and RM43.0m worth of receivables due within a year. So it can boast RM33.3m more liquid assets than total liabilities.

This surplus suggests that Go Hub Capital Berhad has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Go Hub Capital Berhad boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Go Hub Capital Berhad

In fact Go Hub Capital Berhad's saving grace is its low debt levels, because its EBIT has tanked 32% in the last twelve months. When it comes to paying off debt, falling earnings are no more useful than sugary sodas are for your health. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Go Hub Capital Berhad's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Go Hub Capital 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, Go Hub Capital 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 Go Hub Capital Berhad has RM9.42m in net cash and a decent-looking balance sheet. So while Go Hub Capital Berhad does not have a great balance sheet, it's certainly not too bad. 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. We've identified 3 warning signs with Go Hub Capital Berhad (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.