NetX Holdings Berhad (KLSE:NETX) Has Debt But No Earnings; Should You Worry?

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.' 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. We can see that NetX Holdings Berhad (KLSE:NETX) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is NetX Holdings Berhad's Net Debt?

You can click the graphic below for the historical numbers, but it shows that NetX Holdings Berhad had RM13.6m of debt in August 2025, down from RM25.4m, one year before. But on the other hand it also has RM50.2m in cash, leading to a RM36.6m net cash position.

A Look At NetX Holdings Berhad's Liabilities

The latest balance sheet data shows that NetX Holdings Berhad had liabilities of RM23.0m due within a year, and liabilities of RM11.9m falling due after that. On the other hand, it had cash of RM50.2m and RM8.48m worth of receivables due within a year. So it can boast RM23.9m more liquid assets than total liabilities.

This excess liquidity is a great indication that NetX Holdings Berhad's balance sheet is almost as strong as Fort Knox. On this view, lenders should feel as safe as the beloved of a black-belt karate master. Succinctly put, NetX Holdings Berhad boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But it is NetX Holdings 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.

View our latest analysis for NetX Holdings Berhad

In the last year NetX Holdings Berhad had a loss before interest and tax, and actually shrunk its revenue by 29%, to RM11m. To be frank that doesn't bode well.

So How Risky Is NetX Holdings Berhad?

Although NetX Holdings Berhad had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of RM4.2m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. The next few years will be important as 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. For example, we've discovered 4 warning signs for NetX Holdings Berhad (2 don't sit too well with us!) that you should be aware of before investing here.

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.