China Unicom Hong Kong Ltd CAPEX dropped on 35.8% and Revenue showed almost no change
15/03/2018 • About China Unicom Hong Kong Ltd (
$762) • By InTwits
China Unicom Hong Kong Ltd reported 2017 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: 2017 ROIC is 1.0%
- China Unicom Hong Kong Ltd has high CAPEX intensity: 5 year average CAPEX/Revenue was 28.5%. At the same time it's in pair with industry average of 26.8%.
- CAPEX is quite volatile: 16,336 in 2017, 17,504 in 2016, 9,079 in 2015, 8,125 in 2014, 8,211 in 2013
- The company has potentially unprofitable business model: ROIC is at 1.0%
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 | 2013 | 2014 | 2015 | 2016 | 2017 | 2017/2016 |
|---|
P&L
|
|---|
| Revenue | 295,038 | 284,681 | 277,049 | 274,197 | 274,829 | 0.2% |
| SG&A | 45,745 | 42,480 | 2,134 | 56,542 | 59,079 | 4.5% |
| EBITDA | 83,963 | 92,771 | 87,502 | 79,498 | 81,425 | 2.4% |
| Net Income | 10,408 | 12,055 | 10,562 | 625 | 1,828 | 192.5% |
Balance Sheet
|
|---|
| Cash | 21,506 | 25,308 | 21,755 | 23,633 | 32,836 | 38.9% |
| Short Term Debt | 129,631 | 112,862 | 106,654 | 134,713 | 50,345 | -62.6% |
| Long Term Debt | 13,639 | 23,998 | 40,944 | 40,579 | 21,685 | -46.6% |
Cash flow
|
|---|
| Capex | 72,758 | 69,586 | 88,465 | 102,385 | 65,693 | -35.8% |
Ratios
|
|---|
| Revenue growth | 18.5% | -3.5% | -2.7% | -1.0% | 0.2% | |
| EBITDA growth | 15.6% | 10.5% | -5.7% | -9.1% | 2.4% | |
| EBITDA Margin | 28.5% | 32.6% | 31.6% | 29.0% | 29.6% | 0.6% |
| Net Income Margin | 3.5% | 4.2% | 3.8% | 0.2% | 0.7% | 0.4% |
| SG&A, % of revenue | 15.5% | 14.9% | 0.8% | 20.6% | 21.5% | 0.9% |
| CAPEX, % of revenue | 24.7% | 24.4% | 31.9% | 37.3% | 23.9% | -13.4% |
| ROIC | 4.4% | 5.2% | 2.9% | 0.7% | 1.0% | 0.3% |
| ROE | 4.9% | 5.4% | 4.6% | 0.3% | 0.7% | 0.4% |
| Net Debt/EBITDA | 1.5x | 1.2x | 1.4x | 1.9x | 0.5x | -1.4x |
China Unicom Hong Kong Ltd ($762) key quoterly financial indicators
| mln. CNY | 17Q1 | 17Q2 | 17Q3 | 17Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 69,005 | 69,155 | 67,618 | 69,051 | -1.9% | -1.1% | 1.1% | 3.0% |
| EBITDA | 20,975 | 22,584 | 21,825 | 16,041 | 5.0% | 6.0% | 6.6% | -9.6% |
| Net Income | 862 | 1,553 | 1,639 | -2,226 | 79.6% | 63.6% | 930.8% | |
Balance Sheet
|
|---|
Ratios
|
|---|
| EBITDA Margin | 30.4% | 32.7% | 32.3% | 23.2% | 2.0% | 2.2% | 1.7% | -3.2% |
| Net Income Margin | 1.2% | 2.2% | 2.4% | -3.2% | 0.6% | 0.9% | 2.2% | -1.8% |
Revenue and profitability
The company's Revenue showed almost no change in 2017. Revenue growth showed acceleration in 17Q4 - it increased 3.0% YoY. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 5.0 pp from 69.9% to 75.0% in 2017.
SG&A as a % of Revenue increased slightly on 0.88 pp from 20.6% to 21.5% in 2017.
Net Income marign showed almost no change in 2017.
Capital expenditures (CAPEX) and working capital investments
In 2017 China Unicom Hong Kong Ltd had CAPEX/Revenue of 23.9%. The company's CAPEX/Revenue decreased slightly on 0.54 pp from 24.4% in 2014 to 23.9% in 2017. It's average CAPEX/Revenue for the last three years was 31.1%.China Unicom Hong Kong Ltd maintained rich investment policy and has spent a big chunk of EBITDA (80.7%) to CAPEX.
Return on investment
The company operates at low ROIC (1.01%) and ROE (0.69%). ROIC showed almost no change in 2017. ROE showed almost no change in 2017.
Leverage (Debt)
Debt level is 0.5x Net Debt / EBITDA and 0.9x Debt / EBITDA. Net Debt / EBITDA dropped on 1.4x from 1.9x to 0.5x in 2017. Debt dropped on 58.9% while cash jumped on 38.9%.
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 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Great World Co Holdings Ltd ($8003) | -81.7% | 61.9% | -3.7% | 1,112.5% | |
| Zheda Lande Scitech Ltd ($8106) | 6.9% | -21.6% | 34.3% | 117.3% | |
| Hong Kong Television Network Ltd ($1137) | 107.4% | -82.2% | 8,010.0% | 65.8% | |
| Xi'an Haitian Antenna Technologies Co Ltd ($8227) | -45.9% | -56.2% | 111.6% | 55.3% | |
| CCT Fortis Holdings Ltd ($138) | -55.3% | -71.3% | 207.1% | 47.2% | |
| |
|---|
| Median (37 companies) | 9.8% | 9.6% | 6.1% | -2.4% | |
|---|
Top companies by Gross margin, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| HKBN Ltd ($1310) | 84.3% | 86.5% | 86.9% | 83.8% | |
| Netel Technology Holdings Ltd ($8256) | 42.1% | 54.9% | 72.3% | 73.1% | |
| Hutchison Telecommunications Hong Kong Holdings Ltd ($215) | 69.1% | 52.7% | 36.2% | 64.1% | |
| Cisco Systems Inc ($4333) | 60.6% | 58.9% | 60.4% | 62.9% | |
| HKT Trust & HKT Ltd ($6823) | 55.7% | 58.2% | 55.3% | 57.3% | |
| |
|---|
| Median (26 companies) | 24.3% | 25.0% | 22.7% | 33.5% | |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Asia Satellite Telecommunications Holdings Ltd ($1135) | 85.8% | 81.6% | 82.4% | 81.5% | |
| Champion Technology Holdings Ltd ($92) | 41.1% | 33.1% | 25.6% | 58.1% | |
| HKT Trust & HKT Ltd ($6823) | 35.0% | 35.9% | 34.9% | 37.2% | |
| HKBN Ltd ($1310) | 39.2% | 40.1% | 39.0% | 35.2% | |
| PCCW Ltd ($8) | 31.9% | 39.2% | 30.6% | 31.9% | |
| |
|---|
| Median (28 companies) | 5.5% | 5.4% | 8.3% | 8.1% | |
|---|
Top companies by CAPEX/Revenue, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Hanny Holdings Ltd ($275) | 11.6% | 28.3% | 0.2% | 643.1% | |
| Vision Values Holdings Ltd ($862) | 1.2% | 8.4% | 3.0% | 72.5% | |
| Netel Technology Holdings Ltd ($8256) | 15.4% | 16.6% | 9.0% | 25.0% | |
| Great World Co Holdings Ltd ($8003) | 108.7% | 7.8% | 0.4% | 14.6% | |
| Synertone Communication Corp ($1613) | 38.4% | 15.8% | 2.1% | 14.3% | |
| |
|---|
| Median (18 companies) | 2.9% | 2.9% | 2.6% | 6.1% | |
|---|
Top companies by ROIC, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| VTech Holdings Ltd ($303) | 39.5% | 40.0% | 39.8% | 37.9% | |
| Telecom Service One Holdings Ltd ($8145) | 5.4% | 26.7% | 39.8% | 37.4% | |
| Champion Technology Holdings Ltd ($92) | 3.0% | 5.2% | 0.9% | 17.4% | |
| Telecom Digital Holdings Ltd ($8336) | 13.3% | 20.2% | 18.9% | 16.7% | |
| Cisco Systems Inc ($4333) | 15.8% | 12.1% | 13.4% | 14.7% | |
| |
|---|
| Median (38 companies) | 6.0% | 5.8% | 5.4% | 6.0% | |
|---|
Top companies by Net Debt / EBITDA
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Z-Obee Holdings Ltd ($948) | 5.9x | | | 70.9x | |
| HKBN Ltd ($1310) | 3.8x | 3.0x | 3.0x | 3.5x | |
| PCCW Ltd ($8) | 2.7x | 2.6x | 2.9x | 3.3x | |
| CITIC Telecom International Holdings Ltd ($1883) | 3.5x | 3.4x | 3.2x | 3.2x | |
| Asia Satellite Telecommunications Holdings Ltd ($1135) | -1.2x | -1.0x | 3.2x | 2.9x | |
| |
|---|
| Median (18 companies) | 0.6x | 0.6x | 0.6x | 1.6x | |
|---|
