SOHO China Ltd reports 97.9 pp EBITDA Margin growth from 104% to 202% in 2015 while 83.7% Revenue decline
08/03/2016 • About SOHO China Ltd (
$410) • By InTwits
SOHO China Ltd reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- SOHO China Ltd is a company in decline: 2015 revenue growth was -83.7%, 5 years revenue CAGR was -44.1%
- EBITDA Margin is quite volatile: 201.9% in 2015, 104.0% in 2014, 80.8% in 2013, 113.6% in 2012, 113.8% in 2011
- SOHO China Ltd has high CAPEX intensity: 5 year average CAPEX/Revenue was 49.0%. At the same time it's a lot of higher than industry average of 20.9%.
- CAPEX is quite volatile: 1,532 in 2015, 2,129 in 2014, 6,472 in 2013, 545 in 2012, 479 in 2011
- The company has potentially unprofitable business model: ROIC is at 2.9%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
SOHO China Ltd ($410) key annual financial indicators
| mln. CNY | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 5,685 | 16,143 | 14,621 | 6,098 | 995 | -83.7% |
| Gross Profit | 2,731 | 9,007 | 8,114 | 3,078 | 734 | -76.2% |
| SG&A | 448 | 558 | 718 | 446 | 277 | -37.9% |
| EBITDA | 6,471 | 18,344 | 11,818 | 6,343 | 2,009 | -68.3% |
| Net Income | 3,892 | 10,585 | 7,388 | 4,080 | 538 | -86.8% |
Balance Sheet
|
|---|
| Cash | 11,202 | 18,492 | 9,069 | 11,962 | 8,406 | -29.7% |
| Short Term Debt | 2,215 | 3,922 | 2,760 | 1,353 | 1,921 | 42.0% |
| Long Term Debt | 11,410 | 19,082 | 14,310 | 18,909 | 15,960 | -15.6% |
Cash flow
|
|---|
| Capex | 479 | 545 | 6,472 | 2,129 | 1,532 | -28.1% |
Ratios
|
|---|
| Revenue growth | -68.8% | 184.0% | -9.4% | -58.3% | -83.7% | |
| EBITDA growth | -26.0% | 183.5% | -35.6% | -46.3% | -68.3% | |
| Gross Margin | 48.0% | 55.8% | 55.5% | 50.5% | 73.7% | 23.3% |
| EBITDA Margin | 113.8% | 113.6% | 80.8% | 104.0% | 201.9% | 97.9% |
| Net Income Margin | 68.5% | 65.6% | 50.5% | 66.9% | 54.0% | -12.9% |
| SG&A, % of revenue | 7.9% | 3.5% | 4.9% | 7.3% | 27.8% | 20.5% |
| CAPEX, % of revenue | 8.4% | 3.4% | 44.3% | 34.9% | 153.9% | 119.0% |
| ROIC | 16.0% | 33.4% | 17.5% | 9.1% | 2.9% | -6.2% |
| ROE | 19.0% | 40.4% | 21.7% | 10.6% | 1.4% | -9.2% |
| Net Debt/EBITDA | 0.4x | 0.2x | 0.7x | 1.3x | 4.7x | 3.4x |
Revenue and profitability
The company's Revenue dropped on 83.7% in 2015. Revenue decline happened at the same time with EBITDA margin expansion. EBITDA Margin surged on 97.9 pp from 104% to 202% in 2015.
Gross Margin surged on 23.3 pp from 50.5% to 73.7% in 2015. SG&A as a % of Revenue jumped on 20.5 pp from 7.3% to 27.8% in 2015.
Net Income marign dropped on 12.9 pp from 66.9% to 54.0% in 2015.
Capital expenditures (CAPEX) and working capital investments
In 2015 SOHO China Ltd had CAPEX/Revenue of 154%. The company's CAPEX/Revenue jumped on 151 pp from 3.4% in 2012 to 154% in 2015. It's average level of CAPEX/Revenue for the last three years was 77.7%.The company invested a big chunk of EBITDA (76.2%) to CAPEX which didn't stop revenue from falling.
Return on investment
The company operates at low ROIC (2.90%) and ROE (1.42%). ROIC decreased on 6.2 pp from 9.1% to 2.9% in 2015. ROE decreased on 9.2 pp from 10.6% to 1.4% in 2015.
Leverage (Debt)
Debt level is 4.7x Net Debt / EBITDA and 8.9x Debt / EBITDA. Net Debt / EBITDA surged on 3.4x from 1.3x to 4.7x in 2015. Debt dropped on 11.7% in 2015 while cash dropped on 29.7% in 2015.
Appendix 1: Peers in Real Estate
Below we provide SOHO China Ltd benchmarking against other companies in Real Estate 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 |
|---|
| Common Splendor International Health Industry Group Ltd ($286) | -0.9% | -0.5% | 1.9% | 4,120.2% | |
| Landsea Green Properties Co Ltd ($106) | -91.1% | -35.1% | -51.2% | 3,097.3% | |
| LVGEM China Real Estate Invest ($95) | -0.1% | -27.5% | -21.9% | 3,008.3% | |
| Rivera Holdings Ltd ($281) | 222.2% | 197.1% | -89.9% | 2,067.2% | |
| Ceneric Holdings Ltd ($542) | -94.0% | -73.9% | -49.8% | 1,922.5% | |
| |
|---|
| Median (173 companies) | 15.0% | 15.4% | 13.1% | 5.2% | 3.9% |
|---|
| SOHO China Ltd ($410) | | 184.0% | -9.4% | -58.3% | -83.7% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Tern Properties Co Ltd ($277) | 96.9% | 96.7% | 98.4% | 98.4% | 98.7% |
| GR Properties Ltd ($108) | 37.4% | 39.3% | | 98.2% | |
| Renhe Commercial Holdings Co Ltd ($1387) | 71.1% | 79.0% | 95.2% | 97.9% | |
| YT Realty Group Ltd ($75) | 91.5% | 94.4% | 96.6% | 96.7% | |
| ITC Properties Group Ltd ($199) | 29.8% | 22.8% | 92.9% | 95.2% | 62.7% |
| |
|---|
| Median (155 companies) | 43.6% | 41.9% | 40.5% | 39.1% | 48.5% |
|---|
| SOHO China Ltd ($410) | 48.0% | 55.8% | 55.5% | 50.5% | 73.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| ITC Properties Group Ltd ($199) | 24.0% | -125.5% | -2,995.7% | 1,685.3% | -525.1% |
| Beijing Properties Holdings Ltd ($925) | 33.2% | -606.3% | 2,162.6% | 224.3% | |
| Chinese Estates Holdings Ltd ($127) | 340.9% | 356.2% | 91.6% | 195.5% | |
| Zall Development Group Ltd ($2098) | 73.6% | 105.3% | 133.1% | 143.2% | |
| Ceneric Holdings Ltd ($542) | -5.9% | -382.7% | -1,024.0% | 126.8% | |
| |
|---|
| Median (173 companies) | 35.1% | 28.9% | 28.0% | 26.4% | 34.2% |
|---|
| SOHO China Ltd ($410) | 113.8% | 113.6% | 80.8% | 104.0% | 201.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| LT Commercial Real Estate Ltd ($112) | 0.0% | 0.0% | 18.0% | 27,965.5% | |
| ITC Properties Group Ltd ($199) | 25.6% | 56.2% | 4,202.4% | 1,304.7% | 189.7% |
| Wanda Hotel Development Co Ltd ($169) | | 5.9% | 24.1% | 1,091.1% | |
| Pacific Century Premium Developments Ltd ($432) | 6.5% | 2.9% | 323.1% | 351.2% | 340.6% |
| Liu Chong Hing Investment Ltd ($194) | 9.4% | 18.5% | 6.1% | 269.7% | 0.9% |
| |
|---|
| Median (174 companies) | 5.8% | 5.5% | 6.1% | 4.6% | 7.2% |
|---|
| SOHO China Ltd ($410) | 8.4% | 3.4% | 44.3% | 34.9% | 153.9% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Rykadan Capital Ltd ($2288) | 17.2% | -1.8% | -2.6% | 48.4% | -3.7% |
| Colour Life Services Group Co Ltd ($1778) | | 44.2% | 47.9% | 29.3% | 14.5% |
| LVGEM China Real Estate Invest ($95) | 0.2% | -0.2% | -1.1% | 22.1% | |
| Zall Development Group Ltd ($2098) | 39.0% | 19.2% | 17.6% | 18.7% | |
| China Overseas Land & Investment Ltd ($688) | 18.0% | 18.4% | 15.1% | 18.5% | |
| |
|---|
| Median (177 companies) | 4.6% | 4.0% | 3.8% | 3.8% | 2.4% |
|---|
| SOHO China Ltd ($410) | 16.0% | 33.4% | 17.5% | 9.1% | 2.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| China Properties Group Ltd ($1838) | 16.9x | 43.0x | 21.4x | 1,523.0x | |
| SRE Group Ltd ($1207) | 10.6x | 14.1x | 24.7x | 1,184.6x | |
| Cheuk Nang Holdings Ltd ($131) | 53.2x | | 177.3x | 901.7x | |
| Tian An China Investment Co Ltd ($28) | 2.4x | 13.2x | 15.1x | 486.6x | |
| Greenland Hong Kong Holdings Ltd ($337) | 3.7x | | 6.2x | 49.3x | |
| |
|---|
| Median (140 companies) | 2.1x | 2.4x | 2.8x | 3.0x | 1.5x |
|---|
| SOHO China Ltd ($410) | 0.4x | 0.2x | 0.7x | 1.3x | 4.7x |
