Hong Kong & China Gas Co Ltd reports 6.4% revenue decline in 2015 and 1.5 pp EBITDA Margin growth from 29.2% to 30.7%
18/03/2016 • About Hong Kong & China Gas Co Ltd (
$3) • By InTwits
Hong Kong & China Gas Co Ltd reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is relatively stable: 30.7% in 2015 vs. 29.2% in 2014 vs. 31.1% in 2011
- Hong Kong & China Gas Co Ltd has high CAPEX intensity: 5 year average CAPEX/Revenue was 20.9%. At the same time it's a lot of higher than industry average of 12.4%.
- CAPEX is quite volatile: 6,796 in 2015, 2,370 in 2014, 6,189 in 2013, 2,598 in 2012, 3,017 in 2011
- The company has potentially unprofitable business model: ROIC is at 6.9%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.3x while industry average is 2.4x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Hong Kong & China Gas Co Ltd ($3) key annual financial indicators
| mln. HKD | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 22,427 | 24,923 | 28,246 | 31,615 | 29,591 | -6.4% |
| EBITDA | 6,986 | 7,473 | 8,356 | 9,232 | 9,083 | -1.6% |
| Net Income | 6,150 | 7,712 | 6,854 | 7,211 | 7,413 | 2.8% |
Balance Sheet
|
|---|
| Cash | 10,749 | 11,925 | 7,560 | 12,055 | 11,926 | -1.1% |
| Short Term Debt | 4,221 | 6,491 | 6,222 | 7,050 | 9,712 | 37.8% |
| Long Term Debt | 21,628 | 25,230 | 24,401 | 24,484 | 23,363 | -4.6% |
Cash flow
|
|---|
| Capex | 4,642 | 5,906 | 5,294 | 6,365 | 6,356 | -0.1% |
Ratios
|
|---|
| Revenue growth | 15.7% | 11.1% | 13.3% | 11.9% | -6.4% | |
| EBITDA growth | 19.8% | 7.0% | 11.8% | 10.5% | -1.6% | |
| EBITDA Margin | 31.1% | 30.0% | 29.6% | 29.2% | 30.7% | 1.5% |
| Net Income Margin | 27.4% | 30.9% | 24.3% | 22.8% | 25.0% | 2.2% |
| CAPEX, % of revenue | 20.7% | 23.7% | 18.7% | 20.1% | 21.5% | 1.3% |
| ROIC | 8.0% | 7.3% | 7.4% | 7.5% | 6.9% | -0.6% |
| ROE | 15.6% | 17.8% | 14.4% | 13.9% | 13.8% | -0.0% |
| Net Debt/EBITDA | 2.2x | 2.6x | 2.8x | 2.1x | 2.3x | 0.2x |
Revenue and profitability
Hong Kong & China Gas Co Ltd's Revenue decreased on 6.4% in 2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.5 pp from 29.2% to 30.7% in 2015.
Net Income marign increased on 2.2 pp from 22.8% to 25.0% in 2015.
Capital expenditures (CAPEX) and working capital investments
Hong Kong & China Gas Co Ltd's CAPEX/Revenue was 21.5% in 2015. Hong Kong & China Gas Co Ltd showed decline in CAPEX/Revenue of 2.2 pp from 23.7% in 2012 to 21.5% in 2015. It's average level of CAPEX/Revenue for the last three years was 20.1%.Battling declining revenue Hong Kong & China Gas Co Ltd invested a large share of EBITDA (70.0%) to CAPEX but that didn't help at least in this year.
Return on investment
The company operates at good ROE (13.85%) while ROIC is low (6.92%). ROIC decreased slightly on 0.59 pp from 7.5% to 6.9% in 2015. ROE showed almost no change in 2015.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.3x and Debt / EBITDA is 3.6x. Net Debt / EBITDA jumped on 0.2x from 2.1x to 2.3x in 2015. Debt increased on 4.9% in 2015 while cash decreased slightly on 1.1% in 2015.
Appendix 1: Peers in Gas
Below we provide Hong Kong & China Gas Co Ltd benchmarking against other companies in Gas 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 |
|---|
| China Gas Holdings Ltd ($384) | | 19.4% | -5.2% | 44.8% | 21.8% |
| China Resources Gas Group Ltd ($1193) | 52.3% | -4.1% | 63.6% | 28.8% | |
| ENN Energy Holdings Ltd ($2688) | 34.4% | 19.6% | 27.4% | 26.7% | |
| China Oil & Gas Group Ltd ($603) | 67.2% | 11.4% | 31.7% | 19.5% | |
| Towngas China Co Ltd ($1083) | | 20.0% | 29.6% | 17.4% | -2.1% |
| |
|---|
| Median (8 companies) | 52.3% | 16.7% | 29.6% | 18.4% | -2.1% |
|---|
| Hong Kong & China Gas Co Ltd ($3) | | 11.1% | 13.3% | 11.9% | -6.4% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| China Resources Gas Group Ltd ($1193) | 29.3% | 31.2% | 34.2% | 30.3% | |
| ENN Energy Holdings Ltd ($2688) | 25.9% | 26.9% | 23.8% | 20.9% | |
| China Gas Holdings Ltd ($384) | 18.3% | 19.0% | 21.0% | 20.3% | 20.4% |
| Binhai Investment Co Ltd ($2886) | 13.6% | 20.1% | 20.6% | 18.3% | |
| Beijing Enterprises Holdings Ltd ($392) | 22.1% | 20.7% | 19.7% | 17.9% | |
| |
|---|
| Median (7 companies) | 21.2% | 20.7% | 21.0% | 18.3% | 20.3% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Towngas China Co Ltd ($1083) | 19.3% | 19.9% | 18.9% | 18.8% | 19.2% |
| ENN Energy Holdings Ltd ($2688) | 18.4% | 20.4% | 15.1% | 18.2% | |
| China Resources Gas Group Ltd ($1193) | 18.2% | 16.2% | 17.4% | 17.7% | |
| China Gas Holdings Ltd ($384) | 14.2% | 15.2% | 16.5% | 16.6% | 16.8% |
| China Oil & Gas Group Ltd ($603) | 17.6% | 21.5% | 21.2% | 16.0% | |
| |
|---|
| Median (8 companies) | 17.6% | 16.2% | 17.0% | 16.3% | 12.0% |
|---|
| Hong Kong & China Gas Co Ltd ($3) | 31.1% | 30.0% | 29.6% | 29.2% | 30.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Towngas China Co Ltd ($1083) | 21.1% | 31.3% | 25.7% | 26.2% | 26.4% |
| Binhai Investment Co Ltd ($2886) | 23.6% | 26.9% | 18.0% | 15.5% | |
| China Oil & Gas Group Ltd ($603) | 17.1% | 15.0% | 18.3% | 15.4% | |
| China Resources Gas Group Ltd ($1193) | 14.3% | 20.6% | 18.5% | 12.4% | |
| China Gas Holdings Ltd ($384) | 12.2% | 9.4% | 13.7% | 12.3% | 12.3% |
| |
|---|
| Median (8 companies) | 14.3% | 16.0% | 15.1% | 12.4% | 8.9% |
|---|
| Hong Kong & China Gas Co Ltd ($3) | 20.7% | 23.7% | 18.7% | 20.1% | 21.5% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| ENN Energy Holdings Ltd ($2688) | 13.1% | 14.3% | 11.7% | 16.4% | |
| China Resources Gas Group Ltd ($1193) | 11.9% | 6.9% | 10.4% | 11.4% | |
| Binhai Investment Co Ltd ($2886) | 7.6% | 12.2% | 12.2% | 10.9% | |
| China Gas Holdings Ltd ($384) | 6.8% | 8.4% | 8.6% | 10.6% | 10.6% |
| China Oil & Gas Group Ltd ($603) | 14.0% | 13.7% | 13.2% | 7.6% | |
| |
|---|
| Median (9 companies) | 7.6% | 7.6% | 10.4% | 7.6% | 5.2% |
|---|
| Hong Kong & China Gas Co Ltd ($3) | 8.0% | 7.3% | 7.4% | 7.5% | 6.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Beijing Enterprises Holdings Ltd ($392) | 1.6x | 3.1x | 2.6x | 4.7x | |
| Towngas China Co Ltd ($1083) | 3.6x | 3.5x | 3.7x | 4.1x | 4.5x |
| Binhai Investment Co Ltd ($2886) | -0.4x | 3.4x | 2.8x | 3.5x | |
| China Gas Holdings Ltd ($384) | 4.4x | 3.7x | 3.7x | 3.1x | 2.9x |
| China Oil & Gas Group Ltd ($603) | -0.8x | -0.0x | 1.0x | 2.8x | |
| |
|---|
| Median (7 companies) | 1.3x | 3.1x | 1.6x | 3.1x | 2.9x |
|---|
| Hong Kong & China Gas Co Ltd ($3) | 2.2x | 2.6x | 2.8x | 2.1x | 2.3x |
