Is YB Ventures Berhad (KLSE:YB) Using Debt In A Risky Way?

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. Importantly, YB Ventures Berhad (KLSE:YB) does carry debt. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

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. If things get really bad, the lenders can take control of the business. 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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is YB Ventures Berhad's Debt?

The image below, which you can click on for greater detail, shows that YB Ventures Berhad had debt of RM20.1m at the end of September 2025, a reduction from RM21.7m over a year. On the flip side, it has RM3.07m in cash leading to net debt of about RM17.1m.

How Healthy Is YB Ventures Berhad's Balance Sheet?

We can see from the most recent balance sheet that YB Ventures Berhad had liabilities of RM27.6m falling due within a year, and liabilities of RM23.9m due beyond that. Offsetting these obligations, it had cash of RM3.07m as well as receivables valued at RM16.6m due within 12 months. So its liabilities total RM31.9m more than the combination of its cash and short-term receivables.

When you consider that this deficiency exceeds the company's RM29.1m market capitalization, you might well be inclined to review the balance sheet intently. 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. There's no doubt that we learn most about debt from the balance sheet. But it is YB Ventures Berhad's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for YB Ventures Berhad

Over 12 months, YB Ventures Berhad made a loss at the EBIT level, and saw its revenue drop to RM61m, which is a fall of 11%. We would much prefer see growth.

Caveat Emptor

While YB Ventures 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. Indeed, it lost a very considerable RM35m at the EBIT level. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it had negative free cash flow of RM3.9m over the last twelve months. That means it's on the risky side of things. 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. Be aware that YB Ventures Berhad is showing 4 warning signs in our investment analysis , you should know about...

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.