Does PNE PCB Berhad (KLSE:PNEPCB) Have A Healthy Balance Sheet?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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 note that PNE PCB Berhad (KLSE:PNEPCB) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

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. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is PNE PCB Berhad's Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 PNE PCB Berhad had RM8.53m of debt, an increase on RM4.93m, over one year. But it also has RM26.4m in cash to offset that, meaning it has RM17.8m net cash.

How Strong Is PNE PCB Berhad's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that PNE PCB Berhad had liabilities of RM24.5m due within 12 months and liabilities of RM12.7m due beyond that. Offsetting these obligations, it had cash of RM26.4m as well as receivables valued at RM23.7m due within 12 months. So it actually has RM12.8m more liquid assets than total liabilities.

This surplus strongly suggests that PNE PCB Berhad has a rock-solid balance sheet (and the debt is of no concern whatsoever). On this view, lenders should feel as safe as the beloved of a black-belt karate master. Succinctly put, PNE PCB 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 PNE PCB Berhad will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for PNE PCB Berhad

Over 12 months, PNE PCB Berhad made a loss at the EBIT level, and saw its revenue drop to RM58m, which is a fall of 17%. We would much prefer see growth.

So How Risky Is PNE PCB 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 PNE PCB Berhad lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of RM8.9m and booked a RM2.5m accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of RM17.8m. That means it could keep spending at its current rate for more than two years. 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. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - PNE PCB Berhad has 2 warning signs we think 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.