China Gas Holdings Ltd reports 32.6% Net Income decline while 3.5 pp EBITDA Margin growth from 16.8% to 20.3%
28/06/2016 • About China Gas Holdings Ltd (
$384) • By InTwits
China Gas Holdings Ltd reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is expanding: 20.3% in FY2016 vs. 16.8% in FY2015 vs. 15.2% in FY2012
- China Gas Holdings Ltd has high CAPEX intensity: 5 year average CAPEX/Revenue was 11.6%. At the same time it's in pair with industry average of 11.6%.
- CAPEX is quite volatile: 894 in FY2016, 989 in FY2015, 1,338 in FY2014, 424 in FY2013, 220 in FY2012
- The company has business model with average profitability: ROIC is at 11.2%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.8x while industry average is 2.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
China Gas Holdings Ltd ($384) key annual financial indicators
| mln. HKD | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 18,934 | 17,956 | 26,008 | 31,666 | 29,139 | -8.0% |
| Gross Profit | 3,606 | 3,776 | 5,286 | 6,456 | 7,033 | 8.9% |
| SG&A | 1,672 | 1,788 | 2,071 | 2,586 | 2,649 | 2.4% |
| EBITDA | 2,874 | 2,971 | 4,319 | 5,326 | 5,909 | 10.9% |
| Net Income | 954 | 1,764 | 2,576 | 3,371 | 2,273 | -32.6% |
Balance Sheet
|
|---|
| Cash | 4,818 | 3,959 | 6,454 | 5,228 | 5,497 | 5.1% |
| Short Term Debt | 8,971 | 8,454 | 5,763 | 3,920 | 10,325 | 163.4% |
| Long Term Debt | 6,407 | 6,356 | 14,192 | 16,817 | 12,010 | -28.6% |
Cash flow
|
|---|
| Capex | 1,783 | 2,457 | 3,208 | 3,887 | 2,967 | -23.7% |
Ratios
|
|---|
| Revenue growth | 19.4% | -5.2% | 44.8% | 21.8% | -8.0% | |
| EBITDA growth | 27.8% | 3.4% | 45.4% | 23.3% | 10.9% | |
| Gross Margin | 19.0% | 21.0% | 20.3% | 20.4% | 24.1% | 3.8% |
| EBITDA Margin | 15.2% | 16.5% | 16.6% | 16.8% | 20.3% | 3.5% |
| Net Income Margin | 5.0% | 9.8% | 9.9% | 10.6% | 7.8% | -2.8% |
| SG&A, % of revenue | 8.8% | 10.0% | 8.0% | 8.2% | 9.1% | 0.9% |
| CAPEX, % of revenue | 9.4% | 13.7% | 12.3% | 12.3% | 10.2% | -2.1% |
| ROIC | 8.4% | 8.6% | 10.6% | 10.6% | 11.2% | 0.6% |
| ROE | 10.3% | 16.6% | 18.9% | 19.7% | 12.5% | -7.2% |
| Net Debt/EBITDA | 3.7x | 3.7x | 3.1x | 2.9x | 2.8x | -0.1x |
Revenue and profitability
China Gas Holdings Ltd's Revenue decreased on 8.0%. Revenue decline happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 3.5 pp from 16.8% to 20.3% in FY2016.
Gross Margin increased on 3.8 pp from 20.4% to 24.1% in FY2016. SG&A as a % of Revenue increased slightly on 0.93 pp from 8.2% to 9.1% in FY2016.
Net Income marign decreased on 2.8 pp from 10.6% to 7.8% in FY2016.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 10.2% in FY2016. China Gas Holdings Ltd showed decline in CAPEX/Revenue of 3.5 pp from 13.7% in FY2013 to 10.2% in FY2016. It's average CAPEX/Revenue for the last three years was 11.6%.Battling declining revenue the company invested a large share of EBITDA (50.2%) to CAPEX but that didn't help at least in this year.
Return on investment
The company operates at good ROE (12.54%) while ROIC is low (11.23%). ROIC increased slightly on 0.61 pp from 10.6% to 11.2% in FY2016. ROE decreased on 7.2 pp from 19.7% to 12.5% in FY2016.
Leverage (Debt)
Debt level is 2.8x Net Debt / EBITDA and 3.8x Debt / EBITDA. Net Debt / EBITDA decreased on 0.1x from 2.9x to 2.8x in FY2016. Debt increased on 7.7% while cash increased on 5.1%.
Appendix 1: Peers in Gas
Below we provide China Gas Holdings 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 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Beijing Enterprises Holdings Ltd ($392) | 16.7% | 19.1% | 13.2% | 25.5% | |
| ENN Energy Holdings Ltd ($2688) | 19.6% | 27.4% | 26.7% | 10.2% | |
| China Resources Gas Group Ltd ($1193) | -4.1% | 63.6% | 28.8% | 8.3% | |
| Suchuang Gas Corp Ltd ($1430) | 10.3% | 26.9% | 18.4% | 1.3% | |
| Binhai Investment Co Ltd ($2886) | 35.0% | 34.2% | 14.1% | 0.5% | |
| |
|---|
| Median (9 companies) | 14.0% | 28.5% | 17.4% | 0.5% | 51.4% |
|---|
| China Gas Holdings Ltd ($384) | | -5.2% | 44.8% | 21.8% | -8.0% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| China Resources Gas Group Ltd ($1193) | 31.2% | 34.2% | 30.3% | 31.5% | |
| Suchuang Gas Corp Ltd ($1430) | 28.9% | 30.1% | 24.2% | 25.2% | |
| ENN Energy Holdings Ltd ($2688) | 26.9% | 23.8% | 20.9% | 21.4% | |
| Binhai Investment Co Ltd ($2886) | 20.1% | 20.6% | 18.3% | 21.3% | |
| China Oil Gangran Energy Group Holdings Ltd ($8132) | 9.4% | 17.2% | 16.4% | 20.3% | 10.1% |
| |
|---|
| Median (7 companies) | 22.5% | 22.6% | 18.3% | 21.3% | 10.1% |
|---|
| China Gas Holdings Ltd ($384) | 19.0% | 21.0% | 20.3% | 20.4% | 24.1% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Hong Kong & China Gas Co Ltd ($3) | 30.0% | 29.6% | 29.2% | 30.7% | |
| Suchuang Gas Corp Ltd ($1430) | 30.2% | 30.5% | 24.9% | 24.0% | |
| Binhai Investment Co Ltd ($2886) | 14.8% | 17.0% | 15.2% | 20.7% | |
| Towngas China Co Ltd ($1083) | 19.9% | 18.9% | 18.8% | 19.2% | |
| China Resources Gas Group Ltd ($1193) | 16.2% | 17.4% | 17.7% | 19.0% | |
| |
|---|
| Median (10 companies) | 20.1% | 18.2% | 17.7% | 17.7% | -43.0% |
|---|
| China Gas Holdings Ltd ($384) | 15.2% | 16.5% | 16.6% | 16.8% | 20.3% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Towngas China Co Ltd ($1083) | 31.3% | 25.7% | 26.2% | 26.4% | |
| Hong Kong & China Gas Co Ltd ($3) | 23.7% | 18.7% | 20.1% | 21.5% | |
| Binhai Investment Co Ltd ($2886) | 26.9% | 18.0% | 15.5% | 16.7% | |
| China Resources Gas Group Ltd ($1193) | 20.6% | 18.5% | 12.4% | 12.3% | |
| China Oil & Gas Group Ltd ($603) | 15.0% | 18.3% | 15.4% | 11.1% | |
| |
|---|
| Median (10 companies) | 21.2% | 16.6% | 12.4% | 9.6% | 3.4% |
|---|
| China Gas Holdings Ltd ($384) | 9.4% | 13.7% | 12.3% | 12.3% | 10.2% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Suchuang Gas Corp Ltd ($1430) | 13.6% | 19.4% | 23.9% | 20.8% | |
| Binhai Investment Co Ltd ($2886) | 12.2% | 12.2% | 10.9% | 14.7% | |
| ENN Energy Holdings Ltd ($2688) | 14.3% | 11.7% | 16.4% | 13.6% | |
| China Resources Gas Group Ltd ($1193) | 6.9% | 10.4% | 11.4% | 12.5% | |
| Hong Kong & China Gas Co Ltd ($3) | 7.3% | 7.4% | 7.5% | 6.9% | |
| |
|---|
| Median (10 companies) | 7.5% | 11.0% | 7.5% | 6.4% | -27.7% |
|---|
| China Gas Holdings Ltd ($384) | 8.4% | 8.6% | 10.6% | 10.6% | 11.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| China Oil & Gas Group Ltd ($603) | -0.0x | 1.0x | 2.8x | 6.0x | |
| Towngas China Co Ltd ($1083) | 3.5x | 3.7x | 4.1x | 4.5x | |
| Beijing Enterprises Holdings Ltd ($392) | 3.1x | 2.6x | 4.7x | 3.6x | |
| Binhai Investment Co Ltd ($2886) | 3.4x | 2.8x | 3.5x | 2.8x | |
| Hong Kong & China Gas Co Ltd ($3) | 2.6x | 2.8x | 2.1x | 2.3x | |
| |
|---|
| Median (9 companies) | 2.9x | 1.9x | 2.4x | 2.3x | |
|---|
| China Gas Holdings Ltd ($384) | 3.7x | 3.7x | 3.1x | 2.9x | 2.8x |
