We're Not Very Worried About Scope Industries Berhad's (KLSE:SCOPE) Cash Burn Rate

Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. But while the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.

Given this risk, we thought we'd take a look at whether Scope Industries Berhad (KLSE:SCOPE) shareholders should be worried about its cash burn. For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

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When Might Scope Industries Berhad Run Out Of Money?

You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. In March 2025, Scope Industries Berhad had RM32m in cash, and was debt-free. Importantly, its cash burn was RM6.2m over the trailing twelve months. Therefore, from March 2025 it had 5.2 years of cash runway. Even though this is but one measure of the company's cash burn, the thought of such a long cash runway warms our bellies in a comforting way. Depicted below, you can see how its cash holdings have changed over time.

Check out our latest analysis for Scope Industries Berhad

Is Scope Industries Berhad's Revenue Growing?

Given that Scope Industries Berhad actually had positive free cash flow last year, before burning cash this year, we'll focus on its operating revenue to get a measure of the business trajectory. The harsh truth is that operating revenue dropped 60% in the last year, which is quite problematic for a cash burning company. Of course, we've only taken a quick look at the stock's growth metrics, here. This graph of historic earnings and revenue shows how Scope Industries Berhad is building its business over time.

Can Scope Industries Berhad Raise More Cash Easily?

Since its revenue growth is moving in the wrong direction, Scope Industries Berhad shareholders may wish to think ahead to when the company may need to raise more cash. Companies can raise capital through either debt or equity. Many companies end up issuing new shares to fund future growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.

Scope Industries Berhad has a market capitalisation of RM110m and burnt through RM6.2m last year, which is 5.6% of the company's market value. Given that is a rather small percentage, it would probably be really easy for the company to fund another year's growth by issuing some new shares to investors, or even by taking out a loan.

So, Should We Worry About Scope Industries Berhad's Cash Burn?

As you can probably tell by now, we're not too worried about Scope Industries Berhad's cash burn. For example, we think its cash runway suggests that the company is on a good path. While we must concede that its falling revenue is a bit worrying, the other factors mentioned in this article provide great comfort when it comes to the cash burn. After taking into account the various metrics mentioned in this report, we're pretty comfortable with how the company is spending its cash, as it seems on track to meet its needs over the medium term. On another note, we conducted an in-depth investigation of the company, and identified 3 warning signs for Scope Industries Berhad (2 are significant!) that you should be aware of before investing here.

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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.