Does HI Mobility Berhad (KLSE:HI) Have A Healthy Balance Sheet?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. Importantly, HI Mobility Berhad (KLSE:HI) does carry debt. But should shareholders be worried about its use of debt?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

What Is HI Mobility Berhad's Debt?

You can click the graphic below for the historical numbers, but it shows that as of April 2025 HI Mobility Berhad had RM119.3m of debt, an increase on RM81.6m, over one year. However, it does have RM158.0m in cash offsetting this, leading to net cash of RM38.8m.

How Strong Is HI Mobility Berhad's Balance Sheet?

The latest balance sheet data shows that HI Mobility Berhad had liabilities of RM77.2m due within a year, and liabilities of RM145.6m falling due after that. On the other hand, it had cash of RM158.0m and RM43.8m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by RM21.0m.

This state of affairs indicates that HI Mobility Berhad's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the RM1.14b company is short on cash, but still worth keeping an eye on the balance sheet. While it does have liabilities worth noting, HI Mobility Berhad also has more cash than debt, so we're pretty confident it can manage its debt safely.

View our latest analysis for HI Mobility Berhad

Fortunately, HI Mobility Berhad grew its EBIT by 9.0% in the last year, making that debt load look even more manageable. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if HI Mobility Berhad can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. HI Mobility Berhad may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. In the last three years, HI Mobility Berhad's free cash flow amounted to 37% of its EBIT, less than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

We could understand if investors are concerned about HI Mobility Berhad's liabilities, but we can be reassured by the fact it has has net cash of RM38.8m. On top of that, it increased its EBIT by 9.0% in the last twelve months. So we are not troubled with HI Mobility Berhad's debt use. 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 example, we've discovered 1 warning sign for HI Mobility 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.