Is Sealink International Berhad (KLSE:SEALINK) Weighed On By Its Debt Load?

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. As with many other companies Sealink International Berhad (KLSE:SEALINK) makes use of debt. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

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. 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 Sealink International Berhad's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Sealink International Berhad had RM29.8m of debt in September 2025, down from RM35.3m, one year before. But on the other hand it also has RM33.6m in cash, leading to a RM3.85m net cash position.

How Healthy Is Sealink International Berhad's Balance Sheet?

The latest balance sheet data shows that Sealink International Berhad had liabilities of RM110.6m due within a year, and liabilities of RM16.5m falling due after that. Offsetting this, it had RM33.6m in cash and RM96.5m in receivables that were due within 12 months. So it actually has RM2.99m more liquid assets than total liabilities.

This state of affairs indicates that Sealink International Berhad's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the RM167.5m company is short on cash, but still worth keeping an eye on the balance sheet. Succinctly put, Sealink International Berhad boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But it is Sealink International Berhad's earnings that will influence how the balance sheet holds up in the future. 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.

Check out our latest analysis for Sealink International Berhad

Over 12 months, Sealink International Berhad reported revenue of RM156m, which is a gain of 19%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Sealink International Berhad?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months Sealink International Berhad lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of RM6.6m and booked a RM15m accounting loss. Given it only has net cash of RM3.85m, the company may need to raise more capital if it doesn't reach break-even soon. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 1 warning sign for Sealink International Berhad you should be aware of.

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.