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We Think Sunway Construction Group Berhad (KLSE:SUNCON) Can Manage Its Debt With Ease

Simply Wall St · 2d ago

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. We can see that Sunway Construction Group Berhad (KLSE:SUNCON) does use debt in its business. But the more important question is: how much risk is that debt creating?

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Sunway Construction Group Berhad Carry?

You can click the graphic below for the historical numbers, but it shows that Sunway Construction Group Berhad had RM560.9m of debt in September 2025, down from RM896.0m, one year before. But on the other hand it also has RM2.35b in cash, leading to a RM1.79b net cash position.

debt-equity-history-analysis
KLSE:SUNCON Debt to Equity History January 6th 2026

How Healthy Is Sunway Construction Group Berhad's Balance Sheet?

We can see from the most recent balance sheet that Sunway Construction Group Berhad had liabilities of RM3.92b falling due within a year, and liabilities of RM154.9m due beyond that. On the other hand, it had cash of RM2.35b and RM2.01b worth of receivables due within a year. So it can boast RM280.2m more liquid assets than total liabilities.

This surplus suggests that Sunway Construction Group Berhad has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Sunway Construction Group Berhad boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Sunway Construction Group Berhad

In addition to that, we're happy to report that Sunway Construction Group Berhad has boosted its EBIT by 63%, thus reducing the spectre of future debt repayments. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Sunway Construction Group Berhad can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Sunway Construction Group Berhad has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Happily for any shareholders, Sunway Construction Group Berhad actually produced more free cash flow than EBIT over the last three years. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Sunway Construction Group Berhad has net cash of RM1.79b, as well as more liquid assets than liabilities. And it impressed us with free cash flow of RM2.1b, being 215% of its EBIT. So is Sunway Construction Group Berhad's debt a risk? It doesn't seem so to us. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 1 warning sign with Sunway Construction Group Berhad , and understanding them should be part of your investment process.

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.