Is Mesiniaga Berhad (KLSE:MSNIAGA) Weighed On By Its Debt Load?

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, Mesiniaga Berhad (KLSE:MSNIAGA) does carry debt. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Mesiniaga Berhad's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Mesiniaga Berhad had RM13.5m of debt, an increase on RM12.8m, over one year. But it also has RM37.5m in cash to offset that, meaning it has RM24.1m net cash.

How Healthy Is Mesiniaga Berhad's Balance Sheet?

The latest balance sheet data shows that Mesiniaga Berhad had liabilities of RM63.5m due within a year, and liabilities of RM2.14m falling due after that. Offsetting these obligations, it had cash of RM37.5m as well as receivables valued at RM77.4m due within 12 months. So it can boast RM49.2m more liquid assets than total liabilities.

This surplus strongly suggests that Mesiniaga Berhad has a rock-solid balance sheet (and the debt is of no concern whatsoever). Having regard to this fact, we think its balance sheet is as strong as an ox. Succinctly put, Mesiniaga Berhad boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is Mesiniaga 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 Mesiniaga Berhad

In the last year Mesiniaga Berhad had a loss before interest and tax, and actually shrunk its revenue by 26%, to RM175m. To be frank that doesn't bode well.

So How Risky Is Mesiniaga Berhad?

Although Mesiniaga Berhad had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of RM6.1m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. There's no doubt the next few years will be crucial to how the business matures. 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. Case in point: We've spotted 1 warning sign for Mesiniaga Berhad you should be aware of.

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.

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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.