Hongkong & Shanghai Hotels Ltd/The reports 240% CAPEX growth while 1.7% Revenue decline
16/03/2016 • About Hongkong & Shanghai Hotels Ltd/The (
$45) • By InTwits
Hongkong & Shanghai Hotels Ltd/The reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Hongkong & Shanghai Hotels Ltd/The has high CAPEX intensity: 5 year average CAPEX/Revenue was 22.6%. At the same time it's in pair with industry average of 19.6%.
- CAPEX is quite volatile: 1,392 in 2015, 409 in 2014, 3,221 in 2013, 875 in 2012, 312 in 2011
- The company has potentially unprofitable business model: ROIC is at 2.4%
- It operates with high leverage: Net Debt/EBITDA is 3.8x while industry average is -29.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Hongkong & Shanghai Hotels Ltd/The ($45) key annual financial indicators
| mln. HKD | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 5,009 | 5,178 | 5,508 | 5,838 | 5,741 | -1.7% |
| EBITDA | 1,210 | 1,201 | 1,304 | 1,529 | 1,440 | -5.8% |
| Net Income | 2,259 | 1,555 | 1,712 | 1,146 | 1,000 | -12.7% |
Balance Sheet
|
|---|
| Cash | 1,977 | 1,691 | 1,054 | 844 | 773 | -8.4% |
| Short Term Debt | 1,090 | 1,078 | 550 | 878 | 186 | -78.8% |
| Long Term Debt | 3,229 | 3,096 | 4,936 | 4,603 | 6,006 | 30.5% |
Cash flow
|
|---|
| Capex | 312 | 875 | 3,221 | 409 | 1,392 | 240.3% |
Ratios
|
|---|
| Revenue growth | 6.4% | 3.4% | 6.4% | 6.0% | -1.7% | |
| EBITDA growth | 5.9% | -0.7% | 8.6% | 17.3% | -5.8% | |
| EBITDA Margin | 24.2% | 23.2% | 23.7% | 26.2% | 25.1% | -1.1% |
| Net Income Margin | 45.1% | 30.0% | 31.1% | 19.6% | 17.4% | -2.2% |
| CAPEX, % of revenue | 6.2% | 16.9% | 58.5% | 7.0% | 24.2% | 17.2% |
| ROIC | 2.3% | 2.2% | 2.3% | 2.6% | 2.4% | -0.3% |
| ROE | 7.5% | 4.8% | 5.0% | 3.2% | 2.8% | -0.5% |
| Net Debt/EBITDA | 1.9x | 2.1x | 3.4x | 3.0x | 3.8x | 0.7x |
Revenue and profitability
The company's Revenue decreased slightly on 1.7% in 2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.2 pp from 9.1% to 10.3% in 2015.
Net Income marign decreased on 2.2 pp from 19.6% to 17.4% in 2015.
Capital expenditures (CAPEX) and working capital investments
In 2015 the company had CAPEX/Revenue of 24.2%. CAPEX/Revenue increased on 7.3 pp from 16.9% in 2012 to 24.2% in 2015. For the last three years the average CAPEX/Revenue was 29.9%.Battling declining revenue Hongkong & Shanghai Hotels Ltd/The invested a large share of EBITDA (96.7%) to CAPEX but that didn't help at least in this year.
Return on investment
The company operates at low ROIC (2.36%) and ROE (2.77%). ROIC showed almost no change in 2015. ROE showed almost no change in 2015.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.8x and Debt / EBITDA is 4.3x. Net Debt / EBITDA surged on 0.7x from 3.0x to 3.8x in 2015. Debt surged on 13.0% in 2015 while cash decreased on 8.4% in 2015.
Management team
Hongkong & Shanghai Hotels Ltd/The's CEO is King Man Kwok "Clement". King Man Kwok "Clement" has 16 years tenure at the company.
Appendix 1: Peers in Lodging
Below you can find Hongkong & Shanghai Hotels Ltd/The benchmarking vs. other companies in Lodging industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Zhuhai Holdings Investment Group Ltd ($908) | 13.4% | 229.8% | 14.5% | 57.0% | |
| Carrianna Group Holdings Co Ltd ($126) | | 69.3% | -36.2% | 35.4% | -33.8% |
| NagaCorp Ltd ($3918) | | 24.6% | 23.7% | 17.2% | 24.6% |
| Emperor Entertainment Hotel Ltd ($296) | | 35.9% | 13.8% | 11.7% | -10.2% |
| Far East Consortium International Ltd/HK ($35) | | 6.4% | 111.9% | 9.0% | 25.7% |
| |
|---|
| Median (21 companies) | 26.4% | 18.2% | 13.8% | 0.7% | -13.9% |
|---|
| Hongkong & Shanghai Hotels Ltd/The ($45) | | 3.4% | 6.4% | 6.0% | -1.7% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| SJM Holdings Ltd ($880) | 99.7% | 99.7% | 99.7% | 99.7% | 99.5% |
| Wynn Macau Ltd ($1128) | 97.6% | 97.9% | 98.3% | 98.5% | |
| Emperor Entertainment Hotel Ltd ($296) | 70.9% | 77.1% | 75.6% | 76.8% | 70.9% |
| Asia Standard Hotel Group Ltd ($292) | 52.5% | 60.7% | 73.4% | 72.1% | 67.6% |
| Sino Hotels Holdings Ltd ($1221) | 69.7% | 71.3% | 70.4% | 68.9% | 65.8% |
| |
|---|
| Median (16 companies) | 49.1% | 53.1% | 51.1% | 49.6% | 65.4% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Asia Standard Hotel Group Ltd ($292) | 69.1% | -23.9% | 65.2% | 49.9% | 40.4% |
| Emperor Entertainment Hotel Ltd ($296) | 38.7% | 44.9% | 46.4% | 46.9% | 43.1% |
| Sino Hotels Holdings Ltd ($1221) | 42.8% | 46.5% | 45.9% | 43.1% | 39.6% |
| Far East Consortium International Ltd/HK ($35) | 50.1% | 57.2% | 34.5% | 43.0% | 36.4% |
| NagaCorp Ltd ($3918) | 49.2% | 49.8% | 50.1% | 42.8% | 45.3% |
| |
|---|
| Median (21 companies) | 23.7% | 26.8% | 26.4% | 25.8% | 30.3% |
|---|
| Hongkong & Shanghai Hotels Ltd/The ($45) | 24.2% | 23.2% | 23.7% | 26.2% | 25.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Macau Legend Development Ltd ($1680) | 1.3% | 5.0% | 24.2% | 73.0% | |
| Regal Hotels International Holdings Ltd ($78) | 4.9% | 7.4% | 7.2% | 60.4% | |
| Shangri-La Asia Ltd ($69) | 26.5% | 48.5% | 33.1% | 41.2% | |
| Wynn Macau Ltd ($1128) | 3.2% | 5.2% | 11.0% | 28.2% | |
| NagaCorp Ltd ($3918) | 20.3% | 25.9% | 17.2% | 24.0% | 27.8% |
| |
|---|
| Median (21 companies) | 6.5% | 6.3% | 8.9% | 13.2% | 12.5% |
|---|
| Hongkong & Shanghai Hotels Ltd/The ($45) | 6.2% | 16.9% | 58.5% | 7.0% | 24.2% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| MGM China Holdings Ltd ($2282) | 47.3% | 46.2% | 53.8% | 54.5% | 24.0% |
| Wynn Macau Ltd ($1128) | 66.1% | 53.9% | 42.3% | 29.9% | |
| Galaxy Entertainment Group Ltd ($27) | 14.7% | 25.2% | 30.0% | 27.5% | 10.2% |
| Sands China Ltd ($1928) | 14.5% | 14.2% | 24.4% | 26.7% | 15.8% |
| SJM Holdings Ltd ($880) | 26.2% | 29.7% | 31.0% | 24.8% | 8.6% |
| |
|---|
| Median (21 companies) | 8.8% | 7.9% | 6.7% | 5.0% | 8.1% |
|---|
| Hongkong & Shanghai Hotels Ltd/The ($45) | 2.3% | 2.2% | 2.3% | 2.6% | 2.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Regal Hotels International Holdings Ltd ($78) | | 5.0x | 8.7x | 11.8x | |
| Century City International Holdings Ltd ($355) | -58.1x | 6.5x | 9.3x | 11.2x | |
| Shangri-La Asia Ltd ($69) | 4.0x | 6.0x | 6.8x | 6.9x | |
| Zhuhai Holdings Investment Group Ltd ($908) | -3.7x | -4.1x | 11.1x | 6.7x | |
| Asia Standard Hotel Group Ltd ($292) | 3.5x | | 3.7x | 5.2x | 5.5x |
| |
|---|
| Median (20 companies) | 0.1x | 0.2x | 0.4x | 0.4x | 0.4x |
|---|
| Hongkong & Shanghai Hotels Ltd/The ($45) | 1.9x | 2.1x | 3.4x | 3.0x | 3.8x |
