TK Group Holdings Ltd demonstrated fast growth in recent years. Will the growth continue?
22/03/2016 • About TK Group Holdings Ltd (
$2283) • By InTwits
Have you thought about TK Group Holdings Ltd as a growth stock? Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.
Growth story
TK Group Holdings Ltd showed fast growth in the last financial year. TK Group Holdings Ltd's revenue surged on 20.0% in FY2015. In addition to revenue TK Group Holdings Ltd also keeps delivering EBITDA growth. It was 15.2% in FY2015
In the last 3 years TK Group Holdings Ltd showed fast revenue growth of 13.6% from 2012 to 2015 annualy. EBITDA surged on 5.56% from 2012 to 2015 annualy.
TK Group Holdings Ltd ($2283) financials for the last 5 years
| mln. HKD | 2011 | 2012 | 2013 | 2014 | 2015 |
|---|
| Revenue | 782 | 1,096 | 1,198 | 1,339 | 1,606 |
|---|
| Revenue growth, % | | 40.2% | 9.3% | 11.8% | 20.0% |
|---|
| Gross margin, % | 35.8% | 33.9% | 27.7% | 27.3% | 26.1% |
|---|
| SG&A, % | 20.4% | 18.1% | 15.5% | 14.7% | 14.3% |
|---|
| EBITDA | 172 | 234 | 226 | 239 | 276 |
|---|
| EBITDA growth, % | | 35.9% | -3.6% | 5.9% | 15.2% |
|---|
| EBITDA margin, % | 22.1% | 21.4% | 18.9% | 17.9% | 17.2% |
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| Net Income | 84 | 135 | 121 | 154 | 187 |
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| Net Income margin, % | 10.8% | 12.3% | 10.1% | 11.5% | 11.6% |
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| |
| CAPEX | 70 | 146 | 98 | 183 | 123 |
|---|
| CAPEX/Revenue, % | 8.94% | 13.3% | 8.15% | 13.7% | 7.63% |
|---|
| Debt | 246 | 214 | 169 | 131 | 205 |
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| Cash | 80 | 94 | 333 | 267 | 319 |
|---|
| Net Debt/EBITDA | 1.0x | 0.5x | -0.7x | -0.6x | -0.4x |
|---|
| |
| ROIC, % | 34.0% | 36.8% | 31.1% | 29.4% | 27.6% |
|---|
| ROE, % | 50.6% | 57.0% | 37.5% | 34.3% | 33.0% |
|---|
Profitability and return on investment
EBITDA growth was partly attributed to margin expansion. In the last 3 years TK Group Holdings Ltd showed big decline in EBITDA margin of 4.20 pp from 21.4% in 2012 to 17.2% in 2015.
TK Group Holdings Ltd shows attractive ROIC at 27.6% for the last 12 months which assumes stable development model. Three years ago it was higher at 36.8%. It's average ROIC for the last three years was 29.4%.
Net Income margin increased slightly on 0.100 pp from 11.5% to 11.6% in 2015. In the longer period TK Group Holdings Ltd showed decline of 0.700 pp from 12.3% in 2012 to 11.6% in 2015.
TK Group Holdings Ltd operates at ROE of 33.0%. It's average level of ROE for the last three years was 35.0%.
Capital expenditures (CAPEX)
To fuel this fast growth the company had to invest in CAPEX.TK Group Holdings Ltd's CAPEX/Revenue was 7.63% in FY2015. TK Group Holdings Ltd showed big decline in CAPEX/Revenue of 5.70 pp from 13.3% in 2012 to 7.63% in 2015. It's average CAPEX/Revenue for the last three years was 9.82%.
Leverage (Debt)
The company has negative net debt at -0.4x Net Debt/EBITDA - at the same time with high growth. In the last 3 years the company showed big decline in leverage of 0.92x from 0.51x in 2012 to -0.41x in 2015.
Valuation vs. comparable companies
The company trades at 5.6x EV/EBITDA which is 82.8% lower than 32.2x Miscellaneous Manufactur industry avearge calculated based on 27 companies. The company trades at 8.8x P/E which is 77.8% lower than 39.5x Miscellaneous Manufactur industry avearge calculated based on 10 companies.
For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. At the end of trading day today TK Group Holdings Ltd traded at 10.0x EV/(EBITDA-CAPEX) which is higher vs. -1.5x Miscellaneous Manufactur peer group avearge calculated on the basis of 9 companies.
Peers in Miscellaneous Manufactur
Below we provide TK Group Holdings Ltd benchmarking against other companies in Miscellaneous Manufactur 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 |
|---|
| CSR Corp Ltd ($1766) | 24.0% | 12.0% | 9.7% | 123.7% | |
| Sunny Optical Technology Group Co Ltd ($2382) | | 59.5% | 45.9% | 45.0% | 26.9% |
| Zhuzhou CSR Times Electric Co Ltd ($3898) | 21.4% | 1.5% | 22.2% | 43.2% | |
| Time Watch Investments Ltd ($2033) | | 28.2% | 25.4% | 25.6% | 10.4% |
| China International Marine Containers Group Co Ltd ($2039) | 23.4% | -15.6% | 6.6% | 21.4% | |
| |
|---|
| Median (25 companies) | 23.4% | -7.1% | -0.7% | 6.7% | -7.2% |
|---|
| TK Group Holdings Ltd ($2283) | | 40.2% | 9.3% | 11.8% | 20.0% |
Top companies by Gross margin, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Time Watch Investments Ltd ($2033) | 58.5% | 60.2% | 60.6% | 65.0% | 68.1% |
| Man Sang International Ltd ($938) | 34.7% | 42.4% | 32.8% | 60.3% | 78.6% |
| Lee & Man Chemical Co Ltd ($746) | 46.7% | 34.3% | 35.7% | 41.9% | 39.6% |
| Zhuzhou CSR Times Electric Co Ltd ($3898) | 35.0% | 33.2% | 35.1% | 37.4% | |
| Launch Tech Co Ltd ($2488) | 39.2% | 27.4% | 33.6% | 33.6% | |
| |
|---|
| Median (24 companies) | 20.6% | 19.7% | 19.7% | 23.4% | 18.6% |
|---|
| TK Group Holdings Ltd ($2283) | 35.8% | 33.9% | 27.7% | 27.3% | 26.1% |
Top companies by EBITDA margin, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Lee & Man Chemical Co Ltd ($746) | 42.8% | 30.4% | 31.3% | 38.4% | 37.6% |
| Man Sang International Ltd ($938) | 18.7% | 24.9% | 15.4% | 37.0% | 33.8% |
| IPE Group Ltd ($929) | 24.9% | 25.6% | 22.5% | 29.5% | |
| Zhuzhou CSR Times Electric Co Ltd ($3898) | 19.5% | 18.4% | 19.8% | 20.6% | |
| Time Watch Investments Ltd ($2033) | 16.8% | 17.6% | 16.8% | 19.4% | 20.5% |
| |
|---|
| Median (25 companies) | 10.2% | 8.0% | 8.2% | 9.5% | 4.7% |
|---|
| TK Group Holdings Ltd ($2283) | 22.1% | 21.4% | 18.9% | 17.9% | 17.2% |
Top companies by CAPEX/Revenue, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Lee & Man Chemical Co Ltd ($746) | 1.4% | 5.8% | 51.1% | 33.7% | 22.8% |
| KEE Holdings Co Ltd ($2011) | 20.9% | 21.8% | 43.7% | 24.9% | |
| China International Marine Containers Group Co Ltd ($2039) | 4.7% | 3.9% | 12.1% | 18.5% | |
| China Environmental Energy Investment Ltd ($986) | 77.7% | 6.1% | 0.4% | 17.9% | 47.6% |
| IPE Group Ltd ($929) | 7.1% | 6.3% | 13.3% | 12.3% | |
| |
|---|
| Median (25 companies) | 5.0% | 4.7% | 4.2% | 4.2% | 4.3% |
|---|
| TK Group Holdings Ltd ($2283) | 8.9% | 13.3% | 8.1% | 13.7% | 7.6% |
Top companies by ROIC, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Time Watch Investments Ltd ($2033) | 30.5% | 34.5% | 27.1% | 27.8% | 27.9% |
| Zhuzhou CSR Times Electric Co Ltd ($3898) | 21.4% | 16.9% | 17.7% | 20.0% | |
| Sunny Optical Technology Group Co Ltd ($2382) | 12.2% | 19.7% | 17.8% | 16.5% | 19.4% |
| CSR Corp Ltd ($1766) | 13.4% | 11.1% | 11.2% | 15.3% | |
| Yusei Holdings Ltd ($96) | 8.0% | 4.2% | 7.0% | 13.6% | |
| |
|---|
| Median (25 companies) | 6.4% | 4.2% | 3.6% | 3.9% | 1.4% |
|---|
| TK Group Holdings Ltd ($2283) | 34.0% | 36.8% | 31.1% | 29.4% | 27.6% |
Top companies by Net Debt / EBITDA
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| South China China Ltd ($413) | 2.3x | | 37.5x | 2,842.3x | 27.3x |
| Continental Holdings Ltd ($513) | 8.3x | | 20.1x | 92.9x | 4,203.6x |
| China International Marine Containers Group Co Ltd ($2039) | 2.8x | 4.0x | 4.7x | 5.8x | |
| VS International Group Ltd ($1002) | 8.6x | 5.1x | 6.5x | 4.4x | 3.3x |
| Launch Tech Co Ltd ($2488) | -0.4x | 7.6x | 2.4x | 3.9x | |
| |
|---|
| Median (21 companies) | -0.3x | -0.3x | -0.2x | 0.1x | 0.9x |
|---|
| TK Group Holdings Ltd ($2283) | 1.0x | 0.5x | -0.7x | -0.6x | -0.4x |
