Hongkong & Shanghai Hotels Ltd/The reports 32.5% Net Income decline and 2.2 pp EBITDA Margin decline from 25.1% to 22.9%
20/03/2017 • About Hongkong & Shanghai Hotels Ltd/The (
$45) • By InTwits
Hongkong & Shanghai Hotels Ltd/The reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Hongkong & Shanghai Hotels Ltd/The doesn't have a profitable business model yet: FY2016 ROIC is 1.9%
- Hongkong & Shanghai Hotels Ltd/The has high CAPEX intensity: 5 year average CAPEX/Revenue was 25.3%. At the same time it's in pair with industry average of 22.0%.
- CAPEX is quite volatile: 1,131 in FY2016, 1,392 in FY2015, 409 in FY2014, 3,221 in FY2013, 875 in FY2012
- The company has potentially unprofitable business model: ROIC is at 1.9%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Hongkong & Shanghai Hotels Ltd/The ($45) key annual financial indicators
| mln. HKD | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 5,178 | 5,508 | 5,838 | 5,741 | 5,631 | -1.9% |
| EBITDA | 1,201 | 1,304 | 1,529 | 1,440 | 1,288 | -10.6% |
| Net Income | 1,555 | 1,712 | 1,146 | 1,000 | 675 | -32.5% |
Balance Sheet
|
|---|
| Cash | 1,691 | 1,054 | 844 | 773 | 1,957 | 153.2% |
| Short Term Debt | 1,078 | 550 | 878 | 186 | 2 | -98.9% |
| Long Term Debt | 3,096 | 4,936 | 4,603 | 6,006 | 6,996 | 16.5% |
Cash flow
|
|---|
| Capex | 875 | 3,221 | 409 | 1,392 | 1,131 | -18.8% |
Ratios
|
|---|
| Revenue growth | 3.4% | 6.4% | 6.0% | -1.7% | -1.9% | |
| EBITDA growth | -0.7% | 8.6% | 17.3% | -5.8% | -10.6% | |
| EBITDA Margin | 23.2% | 23.7% | 26.2% | 25.1% | 22.9% | -2.2% |
| Net Income Margin | 30.0% | 31.1% | 19.6% | 17.4% | 12.0% | -5.4% |
| CAPEX, % of revenue | 16.9% | 58.5% | 7.0% | 24.2% | 20.1% | -4.2% |
| ROIC | 2.2% | 2.3% | 2.6% | 2.4% | 1.9% | -0.5% |
| ROE | 4.8% | 5.0% | 3.2% | 2.8% | 1.9% | -0.9% |
| Net Debt/EBITDA | 2.1x | 3.4x | 3.0x | 3.8x | 3.9x | 0.2x |
Revenue and profitability
Hongkong & Shanghai Hotels Ltd/The's Revenue decreased slightly on 1.9%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 2.2 pp from 25.1% to 22.9% in FY2016.
Net Income marign decreased on 5.4 pp from 17.4% to 12.0% in FY2016.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 20.1% in FY2016. CAPEX/Revenue dropped on 38.4 pp from 58.5% in FY2013 to 20.1% in FY2016. It's average CAPEX/Revenue for the last three years was 17.1%.Battling declining revenue the company invested a large share of EBITDA (87.8%) to CAPEX but that didn't help at least in this year.
Return on investment
The company operates at low ROIC (1.88%) and ROE (1.85%). ROIC showed almost no change in FY2016. ROE decreased slightly on 0.91 pp from 2.8% to 1.9% in FY2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.9x and Debt / EBITDA is 5.4x. Net Debt / EBITDA jumped on 0.2x from 3.8x to 3.9x in FY2016. Debt jumped on 13.0% while cash jumped on 153%.
Management team
The company's CEO King Man Kwok "Clement" has spent 16 years at the company. The company's CFO Matthew James Lawson has spent 2 years at the company.
Appendix 1: Peers in Lodging
Below you can find Hongkong & Shanghai Hotels Ltd/The benchmarking vs. other companies in Lodging industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| China New City Commercial Development Ltd ($1321) | -16.9% | 433.0% | -76.2% | 141.3% | |
| Zhuhai Holdings Investment Group Ltd ($908) | 229.8% | 14.5% | 57.0% | 76.3% | |
| Shanghai Jin Jiang International Hotels Group Co Ltd ($2006) | -28.8% | 3.2% | 0.8% | 29.9% | |
| Century City International Holdings Ltd ($355) | 283.6% | 108.7% | -35.8% | 25.9% | |
| Far East Consortium International Ltd/HK ($35) | | 111.9% | 9.0% | 25.7% | -21.8% |
| |
|---|
| Median (23 companies) | 9.8% | 13.8% | 0.7% | -10.2% | -5.4% |
|---|
| Hongkong & Shanghai Hotels Ltd/The ($45) | | 6.4% | 6.0% | -1.7% | -1.9% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| SJM Holdings Ltd ($880) | 99.7% | 99.7% | 99.7% | 99.5% | 99.4% |
| Wynn Macau Ltd ($1128) | 97.9% | 98.3% | 98.5% | 98.4% | |
| Emperor Entertainment Hotel Ltd ($296) | 77.1% | 75.6% | 76.8% | 70.9% | 65.5% |
| Asia Standard Hotel Group Ltd ($292) | 60.7% | 73.4% | 72.1% | 67.6% | 65.8% |
| Sino Hotels Holdings Ltd ($1221) | 71.3% | 70.4% | 68.9% | 65.8% | 62.0% |
| |
|---|
| Median (18 companies) | 56.4% | 51.1% | 51.7% | 48.6% | 63.7% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| NagaCorp Ltd ($3918) | 49.8% | 50.1% | 42.8% | 45.3% | 48.1% |
| Emperor Entertainment Hotel Ltd ($296) | 44.9% | 46.4% | 46.9% | 43.1% | 36.2% |
| Jinmao Investments and Jinmao China Investments Holdings Ltd ($6139) | 41.2% | 40.5% | 25.8% | 41.5% | |
| Asia Standard Hotel Group Ltd ($292) | -23.9% | 65.2% | 49.9% | 40.4% | 17.8% |
| Sino Hotels Holdings Ltd ($1221) | 46.5% | 45.9% | 43.1% | 39.6% | 33.1% |
| |
|---|
| Median (23 companies) | 26.8% | 26.4% | 25.8% | 22.6% | 25.3% |
|---|
| Hongkong & Shanghai Hotels Ltd/The ($45) | 23.2% | 23.7% | 26.2% | 25.1% | 22.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Macau Legend Development Ltd ($1680) | 5.0% | 24.2% | 73.0% | 68.5% | |
| Wynn Macau Ltd ($1128) | 5.2% | 11.0% | 28.2% | 66.6% | |
| Legend Strategy International Holdings Group Co Ltd ($1355) | 17.0% | 38.0% | 1.2% | 62.6% | |
| Century City International Holdings Ltd ($355) | 21.2% | 32.9% | 13.4% | 35.8% | |
| Shangri-La Asia Ltd ($69) | 48.5% | 33.1% | 41.2% | 34.3% | |
| |
|---|
| Median (23 companies) | 6.3% | 8.9% | 13.2% | 12.8% | 6.4% |
|---|
| Hongkong & Shanghai Hotels Ltd/The ($45) | 16.9% | 58.5% | 7.0% | 24.2% | 20.1% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| NagaCorp Ltd ($3918) | 30.6% | 28.9% | 22.6% | 28.6% | 21.3% |
| MGM China Holdings Ltd ($2282) | 46.2% | 53.8% | 54.5% | 24.0% | 16.0% |
| Sands China Ltd ($1928) | 14.2% | 24.4% | 26.7% | 15.8% | 14.3% |
| Emperor Entertainment Hotel Ltd ($296) | 22.2% | 21.1% | 18.4% | 12.0% | 7.5% |
| Galaxy Entertainment Group Ltd ($27) | 25.2% | 30.0% | 27.5% | 10.2% | 12.7% |
| |
|---|
| Median (23 companies) | 7.6% | 5.7% | 3.9% | 3.9% | 6.5% |
|---|
| Hongkong & Shanghai Hotels Ltd/The ($45) | 2.2% | 2.3% | 2.6% | 2.4% | 1.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| China New City Commercial Development Ltd ($1321) | 26.0x | 7.9x | | 100.1x | |
| Century City International Holdings Ltd ($355) | 6.5x | 9.3x | 11.2x | 12.3x | |
| Regal Hotels International Holdings Ltd ($78) | 5.0x | 8.7x | 11.8x | 11.1x | |
| Shangri-La Asia Ltd ($69) | 6.0x | 6.8x | 6.9x | 9.8x | |
| Macau Legend Development Ltd ($1680) | 2.2x | 0.6x | 0.2x | 7.1x | |
| |
|---|
| Median (21 companies) | 0.5x | 0.6x | 0.5x | 4.0x | 0.4x |
|---|
| Hongkong & Shanghai Hotels Ltd/The ($45) | 2.1x | 3.4x | 3.0x | 3.8x | 3.9x |
