Is JCY International Berhad (KLSE:JCY) Using Debt Sensibly?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 JCY International Berhad (KLSE:JCY) does use debt in its business. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

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. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is JCY International Berhad's Debt?

As you can see below, JCY International Berhad had RM31.2m of debt at June 2025, down from RM34.8m a year prior. However, its balance sheet shows it holds RM209.4m in cash, so it actually has RM178.2m net cash.

A Look At JCY International Berhad's Liabilities

The latest balance sheet data shows that JCY International Berhad had liabilities of RM102.2m due within a year, and liabilities of RM2.13m falling due after that. Offsetting these obligations, it had cash of RM209.4m as well as receivables valued at RM134.4m due within 12 months. So it actually has RM239.4m more liquid assets than total liabilities.

This luscious liquidity implies that JCY International Berhad's balance sheet is sturdy like a giant sequoia tree. Having regard to this fact, we think its balance sheet is as strong as an ox. Succinctly put, JCY International 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 you can't view debt in total isolation; since JCY International Berhad will need earnings to service that debt. 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 JCY International Berhad

In the last year JCY International Berhad had a loss before interest and tax, and actually shrunk its revenue by 9.3%, to RM513m. That's not what we would hope to see.

So How Risky Is JCY International Berhad?

While JCY International Berhad lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow RM76m. 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. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 2 warning signs for JCY International Berhad (1 is significant) you should be aware of.

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.