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Here's Why M K Land Holdings Berhad (KLSE:MKLAND) Is Weighed Down By Its Debt Load

Simply Wall St · 10/16/2025 23:05

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.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We note that M K Land Holdings Berhad (KLSE:MKLAND) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

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, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is M K Land Holdings Berhad's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 M K Land Holdings Berhad had RM79.7m of debt, an increase on RM50.3m, over one year. However, because it has a cash reserve of RM72.0m, its net debt is less, at about RM7.69m.

debt-equity-history-analysis
KLSE:MKLAND Debt to Equity History October 16th 2025

How Strong Is M K Land Holdings Berhad's Balance Sheet?

The latest balance sheet data shows that M K Land Holdings Berhad had liabilities of RM326.9m due within a year, and liabilities of RM182.9m falling due after that. Offsetting these obligations, it had cash of RM72.0m as well as receivables valued at RM103.9m due within 12 months. So its liabilities total RM333.8m more than the combination of its cash and short-term receivables.

This deficit casts a shadow over the RM216.8m company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. At the end of the day, M K Land Holdings Berhad would probably need a major re-capitalization if its creditors were to demand repayment.

View our latest analysis for M K Land Holdings Berhad

We use two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.

While M K Land Holdings Berhad's low debt to EBITDA ratio of 0.18 suggests only modest use of debt, the fact that EBIT only covered the interest expense by 4.6 times last year does give us pause. But the interest payments are certainly sufficient to have us thinking about how affordable its debt is. We also note that M K Land Holdings Berhad improved its EBIT from a last year's loss to a positive RM33m. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since M K Land Holdings 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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. So it's worth checking how much of the earnings before interest and tax (EBIT) is backed by free cash flow. Over the last year, M K Land Holdings Berhad saw substantial negative free cash flow, in total. While that may be a result of expenditure for growth, it does make the debt far more risky.

Our View

To be frank both M K Land Holdings Berhad's level of total liabilities and its track record of converting EBIT to free cash flow make us rather uncomfortable with its debt levels. But on the bright side, its net debt to EBITDA is a good sign, and makes us more optimistic. Overall, it seems to us that M K Land Holdings Berhad's balance sheet is really quite a risk to the business. For this reason we're pretty cautious about the stock, and we think shareholders should keep a close eye on its liquidity. 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 3 warning signs for M K Land Holdings Berhad (1 shouldn't be ignored) you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.