We Think Express Powerr Solutions (M) Bhd (KLSE:XPB) Can Stay On Top Of Its Debt

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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, Express Powerr Solutions (M) Bhd (KLSE:XPB) does carry debt. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. 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, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Express Powerr Solutions (M) Bhd's Net Debt?

As you can see below, at the end of September 2025, Express Powerr Solutions (M) Bhd had RM13.7m of debt, up from RM2.94m a year ago. Click the image for more detail. However, it does have RM33.3m in cash offsetting this, leading to net cash of RM19.7m.

A Look At Express Powerr Solutions (M) Bhd's Liabilities

We can see from the most recent balance sheet that Express Powerr Solutions (M) Bhd had liabilities of RM8.17m falling due within a year, and liabilities of RM15.9m due beyond that. On the other hand, it had cash of RM33.3m and RM16.7m worth of receivables due within a year. So it can boast RM25.9m more liquid assets than total liabilities.

This excess liquidity suggests that Express Powerr Solutions (M) Bhd is taking a careful approach to debt. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Simply put, the fact that Express Powerr Solutions (M) Bhd has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for Express Powerr Solutions (M) Bhd

But the bad news is that Express Powerr Solutions (M) Bhd has seen its EBIT plunge 13% in the last twelve months. If that rate of decline in earnings continues, the company could find itself in a tight spot. 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 Express Powerr Solutions (M) Bhd'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. While Express Powerr Solutions (M) Bhd has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. In the last three years, Express Powerr Solutions (M) Bhd created free cash flow amounting to 8.8% of its EBIT, an uninspiring performance. That limp level of cash conversion undermines its ability to manage and pay down debt.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Express Powerr Solutions (M) Bhd has net cash of RM19.7m, as well as more liquid assets than liabilities. So we are not troubled with Express Powerr Solutions (M) Bhd's debt use. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 2 warning signs we've spotted with Express Powerr Solutions (M) Bhd (including 1 which doesn't sit too well with us) .

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.