Kantone Holdings Ltd reports 34.8% EBITDA decline and 6.5% Revenue decline
18/09/2015 • About Kantone Holdings Ltd (
$1059) • By InTwits
Kantone Holdings Ltd reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Kantone Holdings Ltd doesn't have a profitable business model yet: FY2015 ROIC is 1.8%
- EBITDA Margin is declining: 21.2% in FY2015 vs. 30.4% in FY2014 vs. 44.2% in FY2011
- Kantone Holdings Ltd has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.6%.
- The company has potentially unprofitable business model: ROIC is at 1.8%
- It operates with high leverage: Net Debt/EBITDA is -0.3x while industry average is -2.3x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Kantone Holdings Ltd ($1059) key annual financial indicators
| mln. HKD | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 1,341 | 1,429 | 1,953 | 2,720 | 2,544 | -6.5% |
| Gross Profit | 281 | 318 | 398 | 461 | 239 | -48.1% |
| SG&A | | | 124 | 148 | 144 | -2.1% |
| EBITDA | 592 | 610 | 759 | 827 | 539 | -34.8% |
| Net Income | 84 | 80 | 77 | 2 | 9 | 315.6% |
Balance Sheet
|
|---|
| Cash | 249 | 116 | 84 | 67 | 196 | 194.7% |
| Short Term Debt | 39 | 29 | 8 | 17 | 5 | -72.7% |
| Long Term Debt | 0 | 0 | 17 | 14 | 9 | -39.3% |
Cash flow
|
|---|
| Capex | 15 | 10 | 10 | 10 | 12 | 17.9% |
Ratios
|
|---|
| Revenue growth | 4.0% | 6.6% | 36.7% | 39.3% | -6.5% | |
| EBITDA growth | 9.3% | 3.0% | 24.4% | 8.9% | -34.8% | |
| Gross Margin | 21.0% | 22.3% | 20.4% | 16.9% | 9.4% | -7.5% |
| EBITDA Margin | 44.2% | 42.7% | 38.9% | 30.4% | 21.2% | -9.2% |
| Net Income Margin | 6.3% | 5.6% | 4.0% | 0.1% | 0.4% | 0.3% |
| SG&A, % of revenue | | | 6.3% | 5.4% | 5.7% | 0.3% |
| CAPEX, % of revenue | 1.1% | 0.7% | 0.5% | 0.4% | 0.5% | 0.1% |
| ROIC | 4.7% | 5.6% | 7.2% | 8.3% | 1.8% | -6.5% |
| ROE | 2.8% | 2.5% | 2.4% | 0.1% | 0.3% | 0.2% |
| Net Debt/EBITDA | -0.4x | -0.1x | -0.1x | -0.0x | -0.3x | -0.3x |
Revenue and profitability
Kantone Holdings Ltd's Revenue decreased on 6.5% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.62 pp from 1.1% to 1.8% in FY2015.
Gross Margin decreased on 7.5 pp from 16.9% to 9.4% in FY2015. SG&A as a % of Revenue showed almost no change in FY2015.
Net Income marign showed almost no change in FY2015.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 0.45% in FY2015. The company's CAPEX/Revenue showed almost no change from FY2012 to FY2015. For the last three years the average CAPEX/Revenue was 0.45%.
Return on investment
The company operates at low ROIC (1.79%) and ROE (0.27%). ROIC decreased on 6.5 pp from 8.3% to 1.8% in FY2015. ROE showed almost no change in FY2015.
Leverage (Debt)
Debt level is -0.3x Net Debt / EBITDA and 0.0x Debt / EBITDA. Net Debt / EBITDA dropped on 0.3x from -0.042x to -0.3x in FY2015. Debt dropped on 57.5% in FY2015 while cash jumped on 195% in FY2015.
Appendix 1: Peers in Software
Below we provide Kantone Holdings 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, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Pizu Group Holdings Ltd ($8053) | | 40.3% | -42.9% | 1,742.9% | 157.9% |
| China City Railway Transportation Technology Holdings Co Ltd ($1522) | 194.6% | 164.0% | 33.6% | 100.5% | |
| China Mobile Games and Cultural Investment Ltd ($8081) | -16.7% | 393.7% | -6.6% | 92.2% | |
| Epicurean and Co Ltd ($8213) | | 177.0% | 185.7% | 62.6% | 22.0% |
| China Bio Cassava Holdings Ltd ($8129) | -15.0% | -14.2% | 38.8% | 55.1% | |
| |
|---|
| Median (30 companies) | 20.0% | 10.6% | 11.1% | 20.9% | 28.4% |
|---|
| Kantone Holdings Ltd ($1059) | | 6.6% | 36.7% | 39.3% | -6.5% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| China Bio Cassava Holdings Ltd ($8129) | 90.2% | 90.4% | 97.4% | 98.4% | |
| NetDragon Websoft Inc ($777) | 90.1% | 93.4% | 90.8% | 89.3% | |
| China Mobile Games and Cultural Investment Ltd ($8081) | 19.4% | 6.5% | 45.3% | 84.8% | |
| Kingdee International Software Group Co Ltd ($268) | 70.1% | 65.0% | 75.3% | 82.5% | |
| Kingsoft Corp Ltd ($3888) | 85.5% | 86.8% | 86.3% | 82.4% | |
| |
|---|
| Median (29 companies) | 43.5% | 40.0% | 38.6% | 37.2% | 39.1% |
|---|
| Kantone Holdings Ltd ($1059) | 21.0% | 22.3% | 20.4% | 16.9% | 9.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Sinosoft Technology Group Ltd ($1297) | 55.5% | 62.6% | 54.9% | 57.2% | |
| International Entertainment Corp ($1009) | 235.1% | 50.8% | 64.0% | 54.9% | 62.0% |
| Microsoft Corp ($4338) | 42.8% | 33.5% | 39.2% | 38.0% | 25.8% |
| Kingdee International Software Group Co Ltd ($268) | 19.5% | 7.8% | 33.2% | 37.2% | |
| TravelSky Technology Ltd ($696) | 43.3% | 38.1% | 35.8% | 31.9% | |
| |
|---|
| Median (30 companies) | 8.4% | 6.9% | 10.6% | 5.4% | 9.1% |
|---|
| Kantone Holdings Ltd ($1059) | 44.2% | 42.7% | 38.9% | 30.4% | 21.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| NetDragon Websoft Inc ($777) | 13.3% | 21.1% | 34.6% | 54.6% | |
| China Eco-Farming Ltd ($8166) | 0.3% | 0.6% | 0.7% | 18.1% | |
| TravelSky Technology Ltd ($696) | 5.8% | 8.9% | 21.7% | 18.1% | |
| Kingsoft Corp Ltd ($3888) | 6.8% | 4.3% | 3.8% | 14.3% | |
| Sing Lee Software Group Ltd ($8076) | 19.4% | 3.3% | 0.2% | 14.0% | |
| |
|---|
| Median (29 companies) | 3.1% | 2.6% | 2.8% | 3.6% | 1.7% |
|---|
| Kantone Holdings Ltd ($1059) | 1.1% | 0.7% | 0.5% | 0.4% | 0.5% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Microsoft Corp ($4338) | 43.4% | 28.6% | 30.3% | 26.2% | 15.6% |
| Sinosoft Technology Group Ltd ($1297) | 31.6% | 34.0% | 21.9% | 20.2% | |
| Boyaa Interactive International Ltd ($434) | 100.4% | 75.3% | 21.3% | 20.0% | |
| ITE Holdings Ltd ($8092) | -19.6% | -15.0% | 10.6% | 16.8% | 19.8% |
| TravelSky Technology Ltd ($696) | 16.2% | 15.0% | 13.8% | 12.5% | |
| |
|---|
| Median (30 companies) | 1.8% | -2.7% | 1.9% | -2.4% | 6.0% |
|---|
| Kantone Holdings Ltd ($1059) | 4.7% | 5.6% | 7.2% | 8.3% | 1.8% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Pizu Group Holdings Ltd ($8053) | | | | 346.1x | -0.4x |
| Epicurean and Co Ltd ($8213) | 2.9x | 2.3x | 4.7x | 12.3x | 12.0x |
| Sing Lee Software Group Ltd ($8076) | | | | 6.2x | |
| China Technology Solar Power Holdings Ltd ($8111) | | | 7.4x | 3.3x | 0.2x |
| Chinasoft International Ltd ($354) | -1.3x | -0.7x | 0.7x | 1.5x | |
| |
|---|
| Median (18 companies) | -1.0x | -0.9x | -1.4x | -1.0x | -0.1x |
|---|
| Kantone Holdings Ltd ($1059) | -0.4x | -0.1x | -0.1x | -0.0x | -0.3x |
