Is Pan Malaysia Corporation Berhad (KLSE:PMCORP) A Risky Investment?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, '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. As with many other companies Pan Malaysia Corporation Berhad (KLSE:PMCORP) makes use of debt. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. If things get really bad, the lenders can take control of the business. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Pan Malaysia Corporation Berhad Carry?

As you can see below, Pan Malaysia Corporation Berhad had RM65.6m of debt, at September 2025, which is about the same as the year before. You can click the chart for greater detail. However, because it has a cash reserve of RM31.7m, its net debt is less, at about RM33.9m.

How Healthy Is Pan Malaysia Corporation Berhad's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Pan Malaysia Corporation Berhad had liabilities of RM74.4m due within 12 months and liabilities of RM70.4m due beyond that. On the other hand, it had cash of RM31.7m and RM32.0m worth of receivables due within a year. So its liabilities total RM81.1m more than the combination of its cash and short-term receivables.

Given this deficit is actually higher than the company's market capitalization of RM63.9m, we think shareholders really should watch Pan Malaysia Corporation Berhad's debt levels, like a parent watching their child ride a bike for the first time. Hypothetically, extremely heavy dilution would be required if the company were forced to pay down its liabilities by raising capital at the current share price. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Pan Malaysia Corporation 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 Pan Malaysia Corporation Berhad

In the last year Pan Malaysia Corporation Berhad had a loss before interest and tax, and actually shrunk its revenue by 14%, to RM188m. That's not what we would hope to see.

Caveat Emptor

While Pan Malaysia Corporation Berhad's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Its EBIT loss was a whopping RM11m. Considering that alongside the liabilities mentioned above make us nervous about the company. We'd want to see some strong near-term improvements before getting too interested in the stock. For example, we would not want to see a repeat of last year's loss of RM32m. And until that time we think this is a risky stock. 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. Case in point: We've spotted 3 warning signs for Pan Malaysia Corporation Berhad you should be aware of, and 2 of them can't be ignored.

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.