Sinosoft Technology Group Ltd is a growth stock to keep your eyes on
30/03/2015 • About Sinosoft Technology Group Ltd (
$1297) • By InTwits
Sinosoft Technology Group Ltd is an attractive growth stock in Software industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.
Growth story
Sinosoft Technology Group Ltd showed fast growth in the last financial year. The company's revenue surged on 23.9% in FY2014. The growth also happened in EBITDA of 29.1% for the same period.
In the longer period Sinosoft Technology Group Ltd showed fast revenue growth of 23.4% from 2011 to 2014 annualy. EBITDA surged on 24.7% from 2011 to 2014 annualy.
Sinosoft Technology Group Ltd ($1297) financials for the last 5 years
| mln. CNY | 2010 | 2011 | 2012 | 2013 | 2014 |
|---|
| Revenue | 152 | 185 | 227 | 281 | 348 |
|---|
| Revenue growth, % | | 21.4% | 22.6% | 23.9% | 23.9% |
|---|
| Gross margin, % | 48.2% | 58.4% | 66.6% | 64.2% | 62.7% |
|---|
| SG&A, % | 8.44% | 8.68% | 9.25% | 10.3% | 9.73% |
|---|
| EBITDA | 72 | 103 | 142 | 154 | 199 |
|---|
| EBITDA growth, % | | 43.2% | 38.3% | 8.6% | 29.1% |
|---|
| EBITDA margin, % | 47.0% | 55.5% | 62.6% | 54.9% | 57.2% |
|---|
| Net Income | 47 | 59 | 76 | 101 | 135 |
|---|
| Net Income margin, % | 30.5% | 31.8% | 33.6% | 35.9% | 38.7% |
|---|
| |
| CAPEX | 1 | 6 | 1 | 2 | 5 |
|---|
| CAPEX/Revenue, % | 0.847% | 3.38% | 0.438% | 0.838% | 1.56% |
|---|
| Debt | 72 | 69 | 82 | 0 | 0 |
|---|
| Cash | 27 | 48 | 53 | 288 | 103 |
|---|
| Net Debt/EBITDA | 0.6x | 0.2x | 0.2x | -1.9x | -0.5x |
|---|
| |
| ROIC, % | | 31.6% | 34.0% | 21.9% | 20.2% |
|---|
| ROE, % | | 36.6% | 39.0% | 23.6% | 19.7% |
|---|
Profitability and return on investment
EBITDA growth was supported by margin expansion. The company showed small growth in EBITDA margin of 2.30 pp from 54.9% to 57.2% in 2014. In the longer period EBITDA margin increased slightly on 1.70 pp from 55.5% in 2011 to 57.2% in 2014.
We call Sinosoft Technology Group Ltd an attractive growth stock as together with the growth it delivers high ROIC at 20.2%. Three years ago it was considerably higher at 31.6%. It's average ROIC for the last three years was 25.4%.
The company showed Net Income margin growth of 2.80 pp from 35.9% to 38.7% in 2014. In the longer period Sinosoft Technology Group Ltd showed fast Net Income margin growth of 6.90 pp from 31.8% in 2011 to 38.7% in 2014.
Sinosoft Technology Group Ltd operates at ROE of 19.7%. It's average ROE for the last three years was 27.5%.
Capital expenditures (CAPEX)
In FY2014 Sinosoft Technology Group Ltd had CAPEX/Revenue of 1.56%. Sinosoft Technology Group Ltd showed big decline in CAPEX/Revenue of 1.81 pp from 3.38% in 2011 to 1.56% in 2014. For the last three years the average CAPEX/Revenue was 0.947%.
Leverage (Debt)
Having such a fast growth profile Sinosoft Technology Group Ltd keeps negative net debt at -0.5x Net Debt/EBITDA. In the last 3 years Sinosoft Technology Group Ltd showed big decline in leverage of 0.73x from 0.21x in 2011 to -0.52x in 2014.
Peers in Software
Below we provide Sinosoft Technology Group Ltd benchmarking against other companies in Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Pizu Group Holdings Ltd ($8053) | | -55.1% | 40.3% | -42.9% | 1,742.9% |
| Epicurean and Co Ltd ($8213) | | -38.5% | 177.0% | 185.7% | 62.6% |
| China Bio Cassava Holdings Ltd ($8129) | | -15.0% | -14.2% | 38.8% | 55.1% |
| Kingsoft Corp Ltd ($3888) | | 5.1% | 38.3% | 54.0% | 54.2% |
| Aurum Pacific China Group Ltd ($8148) | | -51.1% | | | 50.0% |
| |
|---|
| Median (22 companies) | | 12.2% | 5.4% | 9.5% | 21.5% |
|---|
| Sinosoft Technology Group Ltd ($1297) | | 21.4% | 22.6% | 23.9% | 23.9% |
Top companies by Gross margin, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| China Bio Cassava Holdings Ltd ($8129) | 89.7% | 90.2% | 90.4% | 97.4% | 98.4% |
| Kingdee International Software Group Co Ltd ($268) | 76.5% | 70.1% | 65.0% | 75.3% | 82.5% |
| Kingsoft Corp Ltd ($3888) | 86.5% | 85.5% | 86.8% | 86.3% | 82.4% |
| Aurum Pacific China Group Ltd ($8148) | 26.4% | 63.1% | | 81.4% | 72.9% |
| Microsoft Corp ($4338) | 80.2% | 77.7% | 76.2% | 74.0% | 68.8% |
| |
|---|
| Median (22 companies) | 38.6% | 46.4% | 35.6% | 35.2% | 35.1% |
|---|
| Sinosoft Technology Group Ltd ($1297) | 48.2% | 58.4% | 66.6% | 64.2% | 62.7% |
Top companies by EBITDA margin, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| International Entertainment Corp ($1009) | 67.4% | 235.1% | 50.8% | 64.0% | 54.9% |
| Microsoft Corp ($4338) | 42.8% | 42.8% | 33.5% | 39.2% | 38.0% |
| Kingdee International Software Group Co Ltd ($268) | 30.8% | 19.5% | 7.8% | 33.2% | 37.2% |
| Boyaa Interactive International Ltd ($434) | 47.8% | 38.9% | 38.5% | 25.8% | 30.7% |
| Kantone Holdings Ltd ($1059) | 42.0% | 44.2% | 42.7% | 38.9% | 30.4% |
| |
|---|
| Median (22 companies) | -1.4% | 0.6% | 0.0% | 4.7% | 0.7% |
|---|
| Sinosoft Technology Group Ltd ($1297) | 47.0% | 55.5% | 62.6% | 54.9% | 57.2% |
Top companies by CAPEX/Revenue, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| China Eco-Farming Ltd ($8166) | 47.4% | 0.3% | 0.6% | 0.7% | 18.1% |
| Kingsoft Corp Ltd ($3888) | 6.0% | 6.8% | 4.3% | 3.8% | 14.3% |
| Sing Lee Software Group Ltd ($8076) | 13.4% | 19.4% | 3.3% | 0.2% | 14.0% |
| Epicurean and Co Ltd ($8213) | 0.5% | 18.7% | 25.3% | 10.4% | 10.3% |
| Aurum Pacific China Group Ltd ($8148) | 4.8% | 0.0% | | 2.9% | 7.5% |
| |
|---|
| Median (22 companies) | 1.7% | 1.6% | 1.3% | 1.4% | 2.2% |
|---|
| Sinosoft Technology Group Ltd ($1297) | 0.8% | 3.4% | 0.4% | 0.8% | 1.6% |
Top companies by ROIC, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Microsoft Corp ($4338) | 48.1% | 43.4% | 28.6% | 30.3% | 26.2% |
| Boyaa Interactive International Ltd ($434) | | 100.4% | 75.3% | 21.3% | 20.0% |
| ITE Holdings Ltd ($8092) | 3.3% | -19.6% | -15.0% | 10.6% | 16.8% |
| Sing Lee Software Group Ltd ($8076) | -128.9% | -97.7% | -18.7% | -50.9% | 10.0% |
| Kantone Holdings Ltd ($1059) | 5.6% | 4.7% | 5.6% | 7.2% | 8.3% |
| |
|---|
| Median (22 companies) | -5.0% | -4.2% | -4.3% | -2.4% | -4.0% |
|---|
| Sinosoft Technology Group Ltd ($1297) | | 31.6% | 34.0% | 21.9% | 20.2% |
Top companies by Net Debt / EBITDA
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Pizu Group Holdings Ltd ($8053) | | | | | 346.1x |
| Epicurean and Co Ltd ($8213) | | 2.9x | 2.3x | 4.7x | 12.3x |
| Sing Lee Software Group Ltd ($8076) | | | | | 6.2x |
| China Technology Solar Power Holdings Ltd ($8111) | | | | 7.4x | 3.3x |
| Kingdee International Software Group Co Ltd ($268) | -1.3x | -0.1x | 5.0x | 1.1x | 0.5x |
| |
|---|
| Median (12 companies) | -0.9x | -0.9x | -1.4x | -0.7x | 0.2x |
|---|
| Sinosoft Technology Group Ltd ($1297) | 0.6x | 0.2x | 0.2x | -1.9x | -0.5x |
