China Unicom Hong Kong Ltd CAPEX surged on 15.7% in 2016 while Revenue decreased slightly on 1.0%
15/03/2017 • About China Unicom Hong Kong Ltd (
$762) • By InTwits
China Unicom Hong Kong Ltd reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- China Unicom Hong Kong Ltd doesn't have a profitable business model yet: 2016 ROIC is 0.7%
- China Unicom Hong Kong Ltd has high CAPEX intensity: 5 year average CAPEX/Revenue was 30.6%. At the same time it's in pair with industry average of 25.7%.
- CAPEX is quite volatile: 17,504 in 2016, 9,079 in 2015, 8,125 in 2014, 8,211 in 2013, 6,494 in 2012
- The company has potentially unprofitable business model: ROIC is at 0.7%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
China Unicom Hong Kong Ltd ($762) key annual financial indicators
| mln. CNY | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 248,926 | 295,038 | 284,681 | 277,049 | 274,197 | -1.0% |
| SG&A | 38,594 | 45,745 | 42,480 | 2,134 | 56,542 | 2,549.6% |
| EBITDA | 72,659 | 83,963 | 92,771 | 87,502 | 79,498 | -9.1% |
| Net Income | 7,096 | 10,408 | 12,055 | 10,562 | 625 | -94.1% |
Balance Sheet
|
|---|
| Cash | 18,250 | 21,506 | 25,308 | 21,755 | 23,633 | 8.6% |
| Short Term Debt | 139,367 | 129,631 | 112,862 | 106,654 | 134,713 | 26.3% |
| Long Term Debt | 2,753 | 13,639 | 23,998 | 40,944 | 40,579 | -0.9% |
Cash flow
|
|---|
| Capex | 86,783 | 72,758 | 69,586 | 88,465 | 102,385 | 15.7% |
Ratios
|
|---|
| Revenue growth | 19.0% | 18.5% | -3.5% | -2.7% | -1.0% | |
| EBITDA growth | 14.6% | 15.6% | 10.5% | -5.7% | -9.1% | |
| EBITDA Margin | 29.2% | 28.5% | 32.6% | 31.6% | 29.0% | -2.6% |
| Net Income Margin | 2.9% | 3.5% | 4.2% | 3.8% | 0.2% | -3.6% |
| SG&A, % of revenue | 15.5% | 15.5% | 14.9% | 0.8% | 20.6% | 19.9% |
| CAPEX, % of revenue | 34.9% | 24.7% | 24.4% | 31.9% | 37.3% | 5.4% |
| ROIC | 3.5% | 4.4% | 5.2% | 2.9% | 0.7% | -2.2% |
| ROE | 3.4% | 4.9% | 5.4% | 4.6% | 0.3% | -4.3% |
| Net Debt/EBITDA | 1.7x | 1.5x | 1.2x | 1.4x | 1.9x | 0.5x |
China Unicom Hong Kong Ltd ($762) key quoterly financial indicators
| mln. CNY | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 70,340 | 69,915 | 66,884 | 67,058 | | | | |
| EBITDA | 19,972 | 21,312 | 20,465 | 17,749 | | | | |
| Net Income | 480 | 949 | 159 | -963 | | | | |
Balance Sheet
|
|---|
Ratios
|
|---|
| EBITDA Margin | 28.4% | 30.5% | 30.6% | 26.5% | | | | |
| Net Income Margin | 0.7% | 1.4% | 0.2% | -1.4% | | | | |
Revenue and profitability
China Unicom Hong Kong Ltd's Revenue decreased slightly on 1.0%. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 2.6 pp from 31.6% to 29.0% in 2016.
SG&A as a % of Revenue surged on 19.9 pp from 0.77% to 20.6% in 2016.
Net Income marign decreased on 3.6 pp from 3.8% to 0.23% in 2016.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 37.3% in 2016. China Unicom Hong Kong Ltd showed fast CAPEX/Revenue growth of 12.7 pp from 24.7% in 2013 to 37.3% in 2016. It's average CAPEX/Revenue for the last three years was 31.2%.China Unicom Hong Kong Ltd has spent a lot to CAPEX (129% of EBITDA) which didn't stop revenue from falling.
Return on investment
The company operates at low ROIC (0.69%) and ROE (0.27%). ROIC decreased on 2.2 pp from 2.9% to 0.69% in 2016. ROE decreased on 4.3 pp from 4.6% to 0.27% in 2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 1.9x and Debt / EBITDA is 2.2x. Net Debt / EBITDA surged on 0.5x from 1.4x to 1.9x in 2016. Debt surged on 18.8% while cash increased on 8.6%.
Management team
The company's CEO Wang Xiaochu has spent 3 years at the company.
Appendix 1: Peers in Telecommunications
Below we provide China Unicom Hong Kong Ltd benchmarking against other companies in Telecommunications 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 |
|---|
| Hong Kong Television Network Ltd ($1137) | | 107.4% | -82.2% | 8,010.0% | |
| Hanny Holdings Ltd ($275) | | 131.2% | -85.2% | 349.3% | -78.5% |
| CCT Fortis Holdings Ltd ($138) | -24.1% | -55.3% | -71.3% | 207.1% | |
| Xi'an Haitian Antenna Technologies Co Ltd ($8227) | -8.5% | -45.9% | -56.2% | 111.6% | |
| China Trends Holdings Ltd ($8171) | | -70.2% | -16.7% | 106.0% | -22.7% |
| |
|---|
| Median (53 companies) | -0.3% | 8.3% | 9.7% | 7.9% | -2.5% |
|---|
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| HKBN Ltd ($1310) | | 84.3% | 86.5% | 86.9% | 83.8% |
| Netel Technology Holdings Ltd ($8256) | 27.9% | 42.1% | 54.9% | 72.3% | 73.1% |
| Great World Co Holdings Ltd ($8003) | -11.0% | 43.0% | 45.5% | 67.9% | 42.0% |
| APT Satellite Holdings Ltd ($1045) | 58.7% | 64.1% | 62.5% | 61.0% | |
| Cisco Systems Inc ($4333) | 61.2% | 60.6% | 58.9% | 60.4% | 62.9% |
| |
|---|
| Median (50 companies) | 25.5% | 24.4% | 26.1% | 23.1% | 35.6% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Asia Satellite Telecommunications Holdings Ltd ($1135) | 86.5% | 85.8% | 81.6% | 82.4% | 81.5% |
| APT Satellite Holdings Ltd ($1045) | 81.0% | 78.9% | 77.5% | 78.8% | |
| Synertone Communication Corp ($1613) | 44.9% | 48.5% | 49.4% | 51.5% | -77.6% |
| HKBN Ltd ($1310) | | 39.2% | 40.1% | 39.0% | 35.2% |
| HKT Trust & HKT Ltd ($6823) | 36.3% | 35.0% | 35.9% | 34.9% | 37.2% |
| |
|---|
| Median (53 companies) | 7.6% | 5.5% | 5.9% | 9.1% | 8.1% |
|---|
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| APT Satellite Holdings Ltd ($1045) | 74.3% | 2.5% | 27.2% | 115.8% | |
| Hong Kong Television Network Ltd ($1137) | 12,435.9% | 504.9% | 1,283.5% | 79.4% | |
| Asia Satellite Telecommunications Holdings Ltd ($1135) | 93.8% | 71.7% | 75.0% | 52.8% | |
| China Fiber Optic Network System Group Ltd ($3777) | 4.8% | 16.3% | 13.1% | 31.9% | |
| Directel Holdings Ltd ($8337) | 2.1% | 0.1% | 0.6% | 30.2% | |
| |
|---|
| Median (53 companies) | 2.2% | 2.9% | 3.1% | 2.6% | 8.4% |
|---|
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Telecom Service One Holdings Ltd ($8145) | 95.0% | 5.4% | 26.7% | 39.8% | 37.4% |
| VTech Holdings Ltd ($303) | 37.6% | 39.5% | 40.0% | 39.8% | 37.9% |
| Coolpad Group Ltd ($2369) | 8.1% | 6.0% | 9.6% | 29.1% | |
| Telecom Digital Holdings Ltd ($8336) | | 13.3% | 20.2% | 18.9% | 16.7% |
| SmarTone Telecommunications Holdings Ltd ($315) | 37.2% | 23.1% | 12.8% | 17.7% | 14.5% |
| |
|---|
| Median (54 companies) | 7.3% | 5.9% | 6.2% | 5.9% | 4.9% |
|---|
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| CCT Land Holdings Ltd ($261) | 10.1x | 23.8x | 48.4x | 44.8x | |
| China Energine International Holdings Ltd ($1185) | | | 13.3x | 31.7x | |
| China Ground Source Energy Industry Group Ltd ($8128) | -1.6x | 3.5x | 14.3x | 11.3x | |
| China Electronics Corp Holdings Co Ltd ($85) | -2.0x | -1.3x | 12.5x | 7.6x | |
| China All Access Holdings Ltd ($633) | 0.9x | 1.8x | 5.2x | 5.6x | |
| |
|---|
| Median (39 companies) | -0.3x | 0.6x | 0.7x | 0.6x | 1.8x |
|---|
