Is Beng Kuang Marine (SGX:BEZ) A Risky Investment?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Beng Kuang Marine Limited (SGX:BEZ) does use debt in its business. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

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. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Beng Kuang Marine's Net Debt?

The image below, which you can click on for greater detail, shows that Beng Kuang Marine had debt of S$6.22m at the end of June 2025, a reduction from S$6.66m over a year. However, it does have S$25.6m in cash offsetting this, leading to net cash of S$19.4m.

How Strong Is Beng Kuang Marine's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Beng Kuang Marine had liabilities of S$38.6m due within 12 months and liabilities of S$6.75m due beyond that. Offsetting this, it had S$25.6m in cash and S$37.4m in receivables that were due within 12 months. So it actually has S$17.7m more liquid assets than total liabilities.

This excess liquidity suggests that Beng Kuang Marine is taking a careful approach to debt. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Simply put, the fact that Beng Kuang Marine has more cash than debt is arguably a good indication that it can manage its debt safely.

Check out our latest analysis for Beng Kuang Marine

The good news is that Beng Kuang Marine has increased its EBIT by 2.4% over twelve months, which should ease any concerns about debt repayment. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Beng Kuang Marine's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. Beng Kuang Marine 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. During the last three years, Beng Kuang Marine generated free cash flow amounting to a very robust 87% of its EBIT, more than we'd expect. That positions it well to pay down debt if desirable to do so.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Beng Kuang Marine has net cash of S$19.4m, as well as more liquid assets than liabilities. And it impressed us with free cash flow of S$15m, being 87% of its EBIT. So is Beng Kuang Marine's debt a risk? It doesn't seem so to us. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - Beng Kuang Marine has 2 warning signs we think 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.