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

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the 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. Importantly, NEXG Berhad (KLSE:NEXG) does carry debt. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is NEXG Berhad's Net Debt?

As you can see below, at the end of September 2025, NEXG Berhad had RM78.4m of debt, up from RM45.5m a year ago. Click the image for more detail. However, it does have RM264.9m in cash offsetting this, leading to net cash of RM186.4m.

How Strong Is NEXG Berhad's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that NEXG Berhad had liabilities of RM117.7m due within 12 months and liabilities of RM30.3m due beyond that. Offsetting this, it had RM264.9m in cash and RM235.8m in receivables that were due within 12 months. So it can boast RM352.7m more liquid assets than total liabilities.

This surplus liquidity suggests that NEXG Berhad's balance sheet could take a hit just as well as Homer Simpson's head can take a punch. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Succinctly put, NEXG Berhad boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for NEXG Berhad

On top of that, NEXG Berhad grew its EBIT by 33% over the last twelve months, and that growth will make it easier to handle its debt. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine NEXG Berhad's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. NEXG 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. Looking at the most recent three years, NEXG Berhad recorded free cash flow of 38% of its EBIT, which is weaker than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that NEXG Berhad has net cash of RM186.4m, as well as more liquid assets than liabilities. And it impressed us with its EBIT growth of 33% over the last year. So is NEXG Berhad's debt a risk? It doesn't seem so to us. 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. To that end, you should learn about the 4 warning signs we've spotted with NEXG Berhad (including 3 which are concerning) .

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.