Some declare volatility, rather than debt, is the best way to consider about risk as an investor, but Warren Buffett famously stated that ‘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. Importantly, Hubline Berhad (KLSE:HUBLINE) does carry debt. But should shareholders be worried about its utilize of debt?
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. Ultimately, if the company can’t fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we consider about a company’s utilize of debt, we first view at cash and debt toreceiveher.
What Is Hubline Berhad’s Net Debt?
You can click the graphic below for the historical numbers, but it displays that as of September 2025 Hubline Berhad had RM121.9m of debt, an increase on RM81.3m, over one year. However, it does have RM49.7m in cash offsetting this, leading to net debt of about RM72.3m.
How Strong Is Hubline Berhad’s Balance Sheet?
Zooming in on the latest balance sheet data, we can see that Hubline Berhad had liabilities of RM155.7m due within 12 months and liabilities of RM58.9m due beyond that. Offsetting these obligations, it had cash of RM49.7m as well as receivables valued at RM39.5m due within 12 months. So it has liabilities totalling RM125.3m more than its cash and near-term receivables, combined.
This is a mountain of leverage relative to its market capitalization of RM128.7m. Should its lconcludeers demand that it shore up the balance sheet, shareholders would likely face severe dilution. There’s no doubt that we learn most about debt from the balance sheet. But you can’t view debt in total isolation; since Hubline Berhad will necessary earnings to service that debt. So if you’re keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trconclude.
See our latest analysis for Hubline Berhad
Over 12 months, Hubline Berhad built a loss at the EBIT level, and saw its revenue drop to RM168m, which is a fall of 20%. We would much prefer see growth.
Caveat Emptor
Not only did Hubline Berhad’s revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Its EBIT loss was a whopping RM13m. When we view at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we consider its balance sheet is a little strained, though not beyond repair. Another cautilize for caution is that is bled RM43m in negative free cash flow over the last twelve months. So in short it’s a really risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet – far from it. For example, we’ve discovered 4 warning signs for Hubline Berhad (3 are concerning!) that you should be aware of before investing here.
If, after all that, you’re more interested in a quick growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.
Valuation is complex, but we’re here to simplify it.
Discover if Hubline Berhad might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividconcludes, insider trades, and its financial condition.
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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 applying an unbiased methodology and our articles are not intconcludeed to be financial advice. It does not constitute a recommconcludeation to acquire or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focutilized 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.
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