Victory City International Holdings Ltd reports 120% CAPEX growth while 4.4% Revenue decline
28/06/2016 • About Victory City International Holdings Ltd (
$539) • By InTwits
Victory City International Holdings Ltd reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Victory City International Holdings Ltd has medium CAPEX intensity: 5 year average CAPEX/Revenue was 9.1%. At the same time it's in pair with industry average of 11.8%.
- CAPEX is quite volatile: 771 in FY2016, 350 in FY2015, 459 in FY2014, 414 in FY2013, 162 in FY2012
- The company has potentially unprofitable business model: ROIC is at 4.2%
- It operates with high leverage: Net Debt/EBITDA is 3.3x while industry average is 0.6x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Victory City International Holdings Ltd ($539) key annual financial indicators
| mln. HKD | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 3,835 | 4,085 | 5,372 | 5,137 | 4,911 | -4.4% |
| Gross Profit | 716 | 751 | 874 | 957 | 873 | -8.7% |
| SG&A | | 348 | 404 | 418 | 433 | 3.5% |
| EBITDA | 571 | 542 | 627 | 717 | 677 | -5.6% |
| Net Income | 341 | 206 | 277 | 400 | 242 | -39.6% |
Balance Sheet
|
|---|
| Cash | 1,099 | 1,693 | 1,300 | 2,003 | 2,111 | 5.4% |
| Short Term Debt | 1,473 | 1,772 | 2,008 | 2,247 | 1,849 | -17.7% |
| Long Term Debt | 485 | 1,024 | 1,279 | 1,576 | 2,516 | 59.6% |
Cash flow
|
|---|
| Capex | 162 | 414 | 459 | 350 | 771 | 120.2% |
Ratios
|
|---|
| Revenue growth | -5.2% | 6.5% | 31.5% | -4.4% | -4.4% | |
| EBITDA growth | -8.6% | -5.0% | 15.6% | 14.4% | -5.6% | |
| Gross Margin | 18.7% | 18.4% | 16.3% | 18.6% | 17.8% | -0.8% |
| EBITDA Margin | 14.9% | 13.3% | 11.7% | 14.0% | 13.8% | -0.2% |
| Net Income Margin | 8.9% | 5.0% | 5.2% | 7.8% | 4.9% | -2.9% |
| SG&A, % of revenue | | 8.5% | 7.5% | 8.1% | 8.8% | 0.7% |
| CAPEX, % of revenue | 4.2% | 10.1% | 8.6% | 6.8% | 15.7% | 8.9% |
| ROIC | 5.1% | 3.8% | 4.4% | 5.0% | 4.2% | -0.9% |
| ROE | 8.3% | 4.5% | 5.8% | 7.7% | 4.5% | -3.3% |
| Net Debt/EBITDA | 1.5x | 2.0x | 3.2x | 2.5x | 3.3x | 0.8x |
Revenue and profitability
Victory City International Holdings Ltd's Revenue decreased on 4.4%. EBITDA Margin showed almost no change in FY2016.
Gross Margin decreased slightly on 0.84 pp from 18.6% to 17.8% in FY2016. SG&A as a % of Revenue increased slightly on 0.67 pp from 8.1% to 8.8% in FY2016.
Net Income marign decreased on 2.9 pp from 7.8% to 4.9% in FY2016.
Capital expenditures (CAPEX) and working capital investments
In FY2016 the company had CAPEX/Revenue of 15.7%. CAPEX/Revenue increased on 5.6 pp from 10.1% in FY2013 to 15.7% in FY2016. It's average CAPEX/Revenue for the last three years was 10.4%.Battling declining revenue Victory City International Holdings Ltd made large investments to CAPEX (114% of EBITDA) but that didn't help at least in this year.
Return on investment
The company operates at low ROIC (4.15%) and ROE (4.47%). ROIC decreased slightly on 0.85 pp from 5.0% to 4.2% in FY2016. ROE decreased on 3.3 pp from 7.7% to 4.5% in FY2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.3x and Debt / EBITDA is 6.4x. Net Debt / EBITDA jumped on 0.8x from 2.5x to 3.3x in FY2016. Debt surged on 14.2% while cash increased on 5.4%.
Appendix 1: Peers in Textiles
Below we provide Victory City International Holdings Ltd benchmarking against other companies in Textiles 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 |
|---|
| Ping Shan Tea Group Ltd ($364) | -25.9% | 63.7% | -45.7% | 71.6% | |
| China Weaving Materials Holdings Ltd ($3778) | -15.4% | -4.2% | -3.8% | 53.9% | |
| Easyknit Enterprises Holdings Ltd ($616) | 9.6% | 10.2% | 7.3% | 22.3% | |
| Kingdom Holding Co Ltd ($528) | 1.1% | 6.0% | 20.0% | 12.2% | |
| Kam Hing International Holdings Ltd ($2307) | 0.9% | -4.3% | 1.6% | 4.2% | |
| |
|---|
| Median (21 companies) | 0.9% | -4.3% | -8.6% | -6.1% | 0.3% |
|---|
| Victory City International Holdings Ltd ($539) | | 6.5% | 31.5% | -4.4% | -4.4% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Art Textile Technology International Co Ltd ($565) | 9.4% | 11.8% | 18.0% | 81.8% | |
| TAI Ping Carpet International Ltd ($146) | 41.0% | 45.4% | 46.7% | 46.6% | |
| Texwinca Holdings Ltd ($321) | 29.6% | 30.9% | 33.3% | 34.1% | 34.0% |
| Yongsheng Advanced Materials Co Ltd ($3608) | 4.9% | 7.3% | 24.9% | 28.8% | |
| CECEP COSTIN New Materials Group Ltd ($2228) | 31.1% | 32.5% | 32.5% | 28.3% | |
| |
|---|
| Median (20 companies) | 17.1% | 16.6% | 14.4% | 16.3% | 26.4% |
|---|
| Victory City International Holdings Ltd ($539) | 18.7% | 18.4% | 16.3% | 18.6% | 17.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Weiqiao Textile Co ($2698) | 17.5% | 20.2% | 21.4% | 30.8% | |
| CECEP COSTIN New Materials Group Ltd ($2228) | 28.1% | 28.7% | 30.2% | 23.4% | |
| Kingdom Holding Co Ltd ($528) | 26.3% | 25.3% | 24.8% | 23.0% | |
| Yongsheng Advanced Materials Co Ltd ($3608) | 2.5% | 5.1% | 17.5% | 18.9% | |
| Pacific Textiles Holdings Ltd ($1382) | 19.1% | 19.0% | 19.5% | 18.4% | 19.0% |
| |
|---|
| Median (20 companies) | 11.2% | 10.0% | 11.8% | 10.1% | 17.4% |
|---|
| Victory City International Holdings Ltd ($539) | 14.9% | 13.3% | 11.7% | 14.0% | 13.8% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Art Textile Technology International Co Ltd ($565) | 1.0% | 1.9% | 3.9% | 105.3% | |
| Hua Lien International Holding Co Ltd ($969) | 19.7% | 40.5% | 79.6% | 58.1% | |
| Kam Hing International Holdings Ltd ($2307) | 10.6% | 10.5% | 7.6% | 8.3% | |
| TAI Ping Carpet International Ltd ($146) | 8.2% | 10.1% | 6.9% | 7.4% | |
| Wang Tai Holdings Ltd ($1400) | 34.1% | 18.8% | 7.5% | 7.3% | |
| |
|---|
| Median (20 companies) | 2.6% | 1.8% | 3.9% | 4.1% | 3.7% |
|---|
| Victory City International Holdings Ltd ($539) | 4.2% | 10.1% | 8.6% | 6.8% | 15.7% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Pacific Textiles Holdings Ltd ($1382) | 23.7% | 26.4% | 31.6% | 25.9% | 26.6% |
| Yongsheng Advanced Materials Co Ltd ($3608) | 6.2% | 13.2% | 15.4% | 19.6% | |
| Kingdom Holding Co Ltd ($528) | 13.8% | 12.7% | 13.8% | 12.7% | |
| CECEP COSTIN New Materials Group Ltd ($2228) | 22.3% | 20.1% | 17.6% | 11.0% | |
| Texwinca Holdings Ltd ($321) | 8.3% | 5.3% | 5.5% | 8.1% | 14.9% |
| |
|---|
| Median (21 companies) | 5.3% | 5.3% | 4.0% | 4.2% | 20.7% |
|---|
| Victory City International Holdings Ltd ($539) | 5.1% | 3.8% | 4.4% | 5.0% | 4.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| China Weaving Materials Holdings Ltd ($3778) | 3.6x | 3.0x | 5.3x | 5.5x | |
| Silverman Holdings Ltd ($1616) | 1.5x | 2.5x | 2.0x | 3.2x | |
| Wang Tai Holdings Ltd ($1400) | 3.2x | 1.9x | 1.8x | 2.7x | |
| Kam Hing International Holdings Ltd ($2307) | 2.5x | 2.5x | 2.8x | 2.6x | |
| Zhejiang Yonglong Enterprises Co Ltd ($8211) | 4.2x | 0.1x | 3.0x | 1.3x | |
| |
|---|
| Median (14 companies) | 1.5x | 1.3x | 0.7x | 0.1x | -1.0x |
|---|
| Victory City International Holdings Ltd ($539) | 1.5x | 2.0x | 3.2x | 2.5x | 3.3x |
