Is Kumpulan H & L High-Tech Berhad (KLSE:HIGHTEC) A Risky Investment?

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. We note that Kumpulan H & L High-Tech Berhad (KLSE:HIGHTEC) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Kumpulan H & L High-Tech Berhad Carry?

The image below, which you can click on for greater detail, shows that Kumpulan H & L High-Tech Berhad had debt of RM10.3m at the end of October 2025, a reduction from RM11.9m over a year. But it also has RM35.2m in cash to offset that, meaning it has RM25.0m net cash.

A Look At Kumpulan H & L High-Tech Berhad's Liabilities

According to the last reported balance sheet, Kumpulan H & L High-Tech Berhad had liabilities of RM5.39m due within 12 months, and liabilities of RM32.2m due beyond 12 months. On the other hand, it had cash of RM35.2m and RM3.68m worth of receivables due within a year. So it can boast RM1.28m more liquid assets than total liabilities.

Having regard to Kumpulan H & L High-Tech Berhad's size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the RM79.3m company is short on cash, but still worth keeping an eye on the balance sheet. Succinctly put, Kumpulan H & L High-Tech Berhad boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Kumpulan H & L High-Tech Berhad

We saw Kumpulan H & L High-Tech Berhad grow its EBIT by 4.9% in the last twelve months. Whilst that hardly knocks our socks off it is a positive when it comes to debt. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Kumpulan H & L High-Tech Berhad will need 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 trend.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Kumpulan H & L High-Tech 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. Over the last three years, Kumpulan H & L High-Tech Berhad recorded free cash flow worth a fulsome 85% of its EBIT, which is stronger than we'd usually expect. That puts it in a very strong position to pay down debt.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Kumpulan H & L High-Tech Berhad has net cash of RM25.0m, as well as more liquid assets than liabilities. The cherry on top was that in converted 85% of that EBIT to free cash flow, bringing in RM3.5m. So we don't think Kumpulan H & L High-Tech Berhad's use of debt is risky. 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. For instance, we've identified 5 warning signs for Kumpulan H & L High-Tech Berhad (1 shouldn't be ignored) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.