Is JHM Consolidation Berhad (KLSE:JHM) A Risky Investment?

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. We can see that JHM Consolidation Berhad (KLSE:JHM) 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 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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. 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.

How Much Debt Does JHM Consolidation Berhad Carry?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 JHM Consolidation Berhad had RM32.3m of debt, an increase on RM27.3m, over one year. However, its balance sheet shows it holds RM48.9m in cash, so it actually has RM16.7m net cash.

How Strong Is JHM Consolidation Berhad's Balance Sheet?

The latest balance sheet data shows that JHM Consolidation Berhad had liabilities of RM99.0m due within a year, and liabilities of RM34.2m falling due after that. Offsetting these obligations, it had cash of RM48.9m as well as receivables valued at RM82.7m due within 12 months. So these liquid assets roughly match the total liabilities.

Having regard to JHM Consolidation Berhad's size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the RM178.8m company is short on cash, but still worth keeping an eye on the balance sheet. While it does have liabilities worth noting, JHM Consolidation Berhad also has more cash than debt, so we're pretty confident it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if JHM Consolidation Berhad can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

See our latest analysis for JHM Consolidation Berhad

Over 12 months, JHM Consolidation Berhad made a loss at the EBIT level, and saw its revenue drop to RM237m, which is a fall of 12%. We would much prefer see growth.

So How Risky Is JHM Consolidation Berhad?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that JHM Consolidation Berhad had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through RM25m of cash and made a loss of RM20m. Given it only has net cash of RM16.7m, the company may need to raise more capital if it doesn't reach break-even soon. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. 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 2 warning signs for JHM Consolidation Berhad that you should be aware of before investing here.

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.