--- title: "We Think ES Sunlogy Berhad (KLSE:SUNLOGY) Is Taking Some Risk With Its Debt" type: "News" locale: "en" url: "https://longbridge.com/en/news/258953291.md" description: "ES Sunlogy Berhad (KLSE:SUNLOGY) is facing risks due to its debt levels, with RM74.4m in debt and a net debt of RM61.4m after accounting for RM12.9m in cash. Its liabilities exceed cash and receivables by RM9.05m, but its market cap of RM266.0m suggests manageability. The company's net debt is 2.3 times EBITDA, and its interest cover is 5.7 times, indicating some strain. While EBIT grew by 4.8%, the inability to convert EBIT to free cash flow raises concerns about its balance sheet strength, making its debt situation somewhat risky for shareholders." datetime: "2025-09-25T22:35:31.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/258953291.md) - [en](https://longbridge.com/en/news/258953291.md) - [zh-HK](https://longbridge.com/zh-HK/news/258953291.md) --- # We Think ES Sunlogy Berhad (KLSE:SUNLOGY) Is Taking Some Risk With Its Debt The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. As with many other companies **ES Sunlogy Berhad** (KLSE:SUNLOGY) makes use of debt. But should shareholders be worried about its use of debt? We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. ## 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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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 examine debt levels, we first consider both cash and debt levels, together. ## What Is ES Sunlogy Berhad's Debt? The chart below, which you can click on for greater detail, shows that ES Sunlogy Berhad had RM74.4m in debt in April 2025; about the same as the year before. However, because it has a cash reserve of RM12.9m, its net debt is less, at about RM61.4m. KLSE:SUNLOGY Debt to Equity History September 25th 2025 ## How Strong Is ES Sunlogy Berhad's Balance Sheet? According to the last reported balance sheet, ES Sunlogy Berhad had liabilities of RM69.7m due within 12 months, and liabilities of RM63.2m due beyond 12 months. Offsetting this, it had RM12.9m in cash and RM110.9m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by RM9.05m. Of course, ES Sunlogy Berhad has a market capitalization of RM266.0m, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Check out our latest analysis for ES Sunlogy Berhad In order to size up a company's debt relative to its earnings, we calculate its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and its earnings before interest and tax (EBIT) divided by its interest expense (its interest cover). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it. ES Sunlogy Berhad has net debt worth 2.3 times EBITDA, which isn't too much, but its interest cover looks a bit on the low side, with EBIT at only 5.7 times the interest expense. While these numbers do not alarm us, it's worth noting that the cost of the company's debt is having a real impact. We saw ES Sunlogy Berhad grow its EBIT by 4.8% in the last twelve months. That's far from incredible but it is a good thing, when it comes to paying off debt. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine ES Sunlogy 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 business needs free cash flow to pay off debt; accounting profits just don't cut it. So we always check how much of that EBIT is translated into free cash flow. During the last three years, ES Sunlogy Berhad burned a lot of cash. While that may be a result of expenditure for growth, it does make the debt far more risky. ## Our View ES Sunlogy Berhad's struggle to convert EBIT to free cash flow had us second guessing its balance sheet strength, but the other data-points we considered were relatively redeeming. But on the bright side, its ability to to handle its total liabilities isn't too shabby at all. We think that ES Sunlogy Berhad's debt does make it a bit risky, after considering the aforementioned data points together. That's not necessarily a bad thing, since leverage can boost returns on equity, but it is something to be aware of. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered **5 warning signs for ES Sunlogy Berhad** (2 can't be ignored!) that you should be aware of before investing here. When all is said and done, sometimes its easier to focus on companies that don't even need debt. 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