Is ManagePay Systems Berhad (KLSE:MPAY) 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.' 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 note that ManagePay Systems Berhad (KLSE:MPAY) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is ManagePay Systems Berhad's Net Debt?

As you can see below, ManagePay Systems Berhad had RM6.29m of debt at June 2025, down from RM6.92m a year prior. But it also has RM6.52m in cash to offset that, meaning it has RM229.0k net cash.

A Look At ManagePay Systems Berhad's Liabilities

According to the last reported balance sheet, ManagePay Systems Berhad had liabilities of RM12.2m due within 12 months, and liabilities of RM926.0k due beyond 12 months. Offsetting these obligations, it had cash of RM6.52m as well as receivables valued at RM22.0m due within 12 months. So it can boast RM15.4m more liquid assets than total liabilities.

This surplus suggests that ManagePay Systems Berhad is using debt in a way that is appears to be both safe and conservative. Due to its strong net asset position, it is not likely to face issues with its lenders. Simply put, the fact that ManagePay Systems Berhad has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is ManagePay Systems Berhad's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Check out our latest analysis for ManagePay Systems Berhad

In the last year ManagePay Systems Berhad had a loss before interest and tax, and actually shrunk its revenue by 9.8%, to RM15m. We would much prefer see growth.

So How Risky Is ManagePay Systems Berhad?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months ManagePay Systems Berhad lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of RM25m and booked a RM15m accounting loss. Given it only has net cash of RM229.0k, the company may need to raise more capital if it doesn't reach break-even soon. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 3 warning signs for ManagePay Systems Berhad (1 can't be ignored!) that you should be aware of before investing here.

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.