Hong Kong Exchanges and Clearing Ltd demonstrates profitable growth
09/03/2016 • About Hong Kong Exchanges and Clearing Ltd (
$388) • By InTwits
Hong Kong Exchanges and Clearing Ltd is a fast-growing stock in Diversified Finan Serv industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.
Growth story
Hong Kong Exchanges and Clearing Ltd showed growth in the last financial year. Hong Kong Exchanges and Clearing Ltd's revenue surged on 34.0% in FY2015. The growth also happened in EBITDA of 45.4% for the same period.
In the longer period the company showed fast revenue growth of 23.9% from 2012 to 2015 annualy. EBITDA surged on 24.2% from 2012 to 2015 annualy.
Hong Kong Exchanges and Clearing Ltd ($388) financials for the last 5 years
| mln. HKD | 2011 | 2012 | 2013 | 2014 | 2015 |
|---|
| Revenue | 7,357 | 6,432 | 8,131 | 9,127 | 12,233 |
|---|
| Revenue growth, % | | -12.6% | 26.4% | 12.2% | 34.0% |
|---|
| SG&A, % | 0.217% | 0.295% | 0.357% | 0.581% | 0.335% |
|---|
| EBITDA | 6,142 | 5,251 | 5,966 | 6,911 | 10,049 |
|---|
| EBITDA growth, % | | -14.5% | 13.6% | 15.8% | 45.4% |
|---|
| EBITDA margin, % | 83.5% | 81.6% | 73.4% | 75.7% | 82.1% |
|---|
| Net Income | 5,093 | 4,084 | 4,552 | 5,165 | 7,956 |
|---|
| Net Income margin, % | 69.2% | 63.5% | 56.0% | 56.6% | 65.0% |
|---|
| |
| CAPEX | 456 | 1,042 | 797 | 665 | 710 |
|---|
| CAPEX/Revenue, % | 6.20% | 16.2% | 9.80% | 7.29% | 5.80% |
|---|
| Debt | 0 | 6,615 | 6,921 | 7,026 | 3,409 |
|---|
| Cash | 2,340 | 4,035 | 6,531 | 8,067 | 12,744 |
|---|
| Net Debt/EBITDA | -0.4x | 0.5x | 0.1x | -0.2x | -0.9x |
|---|
| |
| ROIC, % | 65.6% | 29.1% | 20.1% | 21.5% | 29.1% |
|---|
| ROE, % | 57.1% | 30.3% | 23.9% | 24.8% | 31.1% |
|---|
Profitability and return on investment
Margin expansion supported EBITDA growth. Hong Kong Exchanges and Clearing Ltd showed EBITDA margin growth of 6.40 pp from 75.7% to 82.1% in 2015. If we look for the longer period Hong Kong Exchanges and Clearing Ltd showed small growth in EBITDA margin of 0.500 pp from 81.6% in 2012 to 82.1% in 2015.
We call Hong Kong Exchanges and Clearing Ltd an attractive growth stock as together with the growth it delivers high ROIC at 29.1%. During the last three years it showed almost no change - it was 29.1% in FY2012. It's average level of ROIC for the last three years was 23.6%.
Hong Kong Exchanges and Clearing Ltd's Net Income margin surged on 8.40 pp from 56.6% to 65% in 2015. In the longer period Net Income margin increased slightly on 1.50 pp from 63.5% in 2012 to 65% in 2015.
Hong Kong Exchanges and Clearing Ltd operates at ROE of 31.1%. It's average level of ROE for the last three years was 26.6%.
Capital expenditures (CAPEX)
To this fast growth the company had to invest in CAPEX.The company's CAPEX/Revenue was 5.80% in FY2015. CAPEX/Revenue dropped on 10.4 pp from 16.2% in 2012 to 5.80% in 2015. Average CAPEX/Revenue for the last three years was 7.63%.
Leverage (Debt)
Hong Kong Exchanges and Clearing Ltd has negative net debt at -0.9x Net Debt/EBITDA - at the same time with high growth. In the last 3 years the company showed big decline in leverage of 1.42x from 0.49x in 2012 to -0.93x in 2015.
Valuation vs. comparable companies
The company trades at 19.7x EV/EBITDA which is 43.9% lower than 35.2x Diversified Finan Serv industry avearge calculated based on 72 companies. At the end of trading day today Hong Kong Exchanges and Clearing Ltd traded at 26.1x P/E which is 63.1% lower than 70.7x Diversified Finan Serv peer group avearge calculated on the basis of 31 companies.
For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The company trades at 21.2x EV/(EBITDA-CAPEX) which is not surprisingly 275% higher than 5.7x Diversified Finan Serv industry avearge calculated based on 29 companies.
Peers in Diversified Finan Serv
Below we provide Hong Kong Exchanges and Clearing Ltd benchmarking against other companies in Diversified Finan Serv 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, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| China New Energy Power Group Ltd ($1041) | | 100.0% | 0.0% | 64,246.0% | |
| ReOrient Group Ltd ($376) | | 112.8% | 75.1% | 1,106.9% | -90.8% |
| Global Strategic Group Ltd ($8007) | | -3.9% | 2.1% | 806.3% | 681.2% |
| AID Partners Capital Holdings Ltd ($8088) | -38.7% | 0.9% | -79.5% | 655.2% | |
| Willie International Holdings Ltd ($273) | | | | 543.9% | |
| |
|---|
| Median (62 companies) | 5.3% | 1.2% | 12.9% | 26.5% | 23.1% |
|---|
| Hong Kong Exchanges and Clearing Ltd ($388) | | -12.6% | 26.4% | 12.2% | 34.0% |
Top companies by Gross margin, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Roma Group Ltd ($8072) | | | | 99.4% | 98.7% |
| Freeman Financial Corp Ltd ($279) | 97.1% | 52.3% | 99.3% | 98.5% | |
| Chinese Strategic Holdings Ltd ($8089) | 97.9% | 99.1% | 97.9% | 97.0% | |
| First China Financial Network Holdings Ltd ($8123) | 98.6% | 93.4% | | 94.5% | |
| Allied Group Ltd ($373) | 94.5% | 95.1% | 94.4% | 93.6% | |
| |
|---|
| Median (13 companies) | 80.8% | 64.2% | 75.1% | 88.2% | 89.0% |
|---|
Top companies by EBITDA margin, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Styland Holdings Ltd ($211) | 68.6% | 198.6% | 91.5% | 161.0% | 17.9% |
| Roma Group Ltd ($8072) | 81.4% | 18.1% | 36.8% | 143.0% | 44.7% |
| First China Financial Network Holdings Ltd ($8123) | -231.6% | -329.2% | -211.2% | 124.3% | |
| Willie International Holdings Ltd ($273) | | | 75.3% | 95.2% | |
| Get Nice Holdings Ltd ($64) | 28.4% | 2.6% | 153.4% | 92.7% | 83.9% |
| |
|---|
| Median (63 companies) | 29.5% | 14.0% | 35.5% | 43.6% | 28.4% |
|---|
| Hong Kong Exchanges and Clearing Ltd ($388) | 83.5% | 81.6% | 73.4% | 75.7% | 82.1% |
Top companies by CAPEX/Revenue, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Gemini Investments Holdings Ltd ($174) | 14.9% | 479.1% | 37.3% | 216.0% | 10.0% |
| China Assurance Finance Group Ltd ($8090) | | 94.7% | 68.9% | 53.3% | |
| Chinese Strategic Holdings Ltd ($8089) | 93.2% | 376.0% | 5.7% | 32.6% | |
| AID Partners Capital Holdings Ltd ($8088) | 196.3% | 4.1% | 2.9% | 28.4% | |
| Asian Capital Holdings Ltd ($8295) | 2.3% | 0.1% | 0.2% | 15.6% | |
| |
|---|
| Median (63 companies) | 2.2% | 1.8% | 1.7% | 1.1% | 1.7% |
|---|
| Hong Kong Exchanges and Clearing Ltd ($388) | 6.2% | 16.2% | 9.8% | 7.3% | 5.8% |
Top companies by ROIC, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| ReOrient Group Ltd ($376) | -24.9% | -45.6% | -53.5% | 128.6% | -2.8% |
| Roma Group Ltd ($8072) | | 19.6% | 43.7% | 107.8% | 13.3% |
| Convoy Financial Holdings Ltd ($1019) | 31.1% | 3.4% | 39.3% | 47.3% | |
| Willie International Holdings Ltd ($273) | -28.1% | -9.5% | 4.7% | 30.9% | |
| Value Partners Group Ltd ($806) | 8.7% | 16.8% | 16.5% | 26.8% | |
| |
|---|
| Median (65 companies) | 4.6% | 3.4% | 4.0% | 4.7% | 1.8% |
|---|
| Hong Kong Exchanges and Clearing Ltd ($388) | 65.6% | 29.1% | 20.1% | 21.5% | 29.1% |
Top companies by Net Debt / EBITDA
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Cash Financial Services Group Ltd ($510) | -1.1x | 7.8x | | 67.5x | |
| Far East Horizon Ltd ($3360) | 17.8x | 16.9x | 21.7x | 20.0x | |
| Bright Smart Securities & Commodities Group Ltd ($1428) | 7.3x | 2.1x | 10.3x | 9.3x | 39.3x |
| China Cinda Asset Management Co Ltd ($1359) | 2.1x | 5.0x | 7.7x | 8.4x | |
| Aeon Credit Service Asia Co Ltd ($900) | 6.3x | 5.2x | 6.0x | 6.9x | 5.5x |
| |
|---|
| Median (45 companies) | -1.1x | -1.3x | 0.2x | 0.1x | -1.5x |
|---|
| Hong Kong Exchanges and Clearing Ltd ($388) | -0.4x | 0.5x | 0.1x | -0.2x | -0.9x |
