SmarTone Telecommunications Holdings Ltd Net Income dropped on 40.1% while EBITDA Margin jumped on 11.6 pp from 21.0% to 32.5%
02/09/2020 • About SmarTone Telecommunications Holdings Ltd (
$315) • By InTwits
SmarTone Telecommunications Holdings Ltd reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
- SmarTone Telecommunications Holdings Ltd is a company in decline: FY2020 revenue growth was -17.0%, 5 years revenue CAGR was -17.8%
- SmarTone Telecommunications Holdings Ltd has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.0%. At the same time it's a lot of higher than industry average of 9.7%.
- CAPEX is quite volatile: 116 HKDm in FY2020, 104 HKDm in FY2019, 1,102 HKDm in FY2018, 192 HKDm in FY2017, 2,187 HKDm in FY2016
- The company has potentially unprofitable business model: ROIC is 6.4%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue dropped on 17.0%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin surged on 11.6 pp from 21.0% to 32.5% in FY2020.
Net Income margin decreased on 2.1 pp from 7.5% to 5.4% in FY2020.
Investments (CAPEX, working capital and M&A)
In FY2020 SmarTone Telecommunications Holdings Ltd had CAPEX/Revenue of 7.7%. The company's CAPEX/Revenue increased slightly on 1.1 pp from 6.6% in FY2017 to 7.7% in FY2020. For the last three years the average CAPEX/Revenue was 6.7%.
Return on investment
The company operates at low ROIC (6.4%) and ROE (7.5%). ROIC decreased on 4.0 pp from 10.4% to 6.4% in FY2020. ROE decreased on 5.3 pp from 12.8% to 7.5% in FY2020. ROIC stuck to a declining trend at -1.8 pp per annum in FY2016-FY2020. ROE stuck to a declining trend at -2.6 pp per annum in the last 5 years.
Leverage (Debt)
Debt level is 0.3x Net Debt / EBITDA and 1.2x Debt / EBITDA. Net Debt / EBITDA increased on 0.1x from 0.2x to 0.3x in FY2020. Debt surged on 20.1% while cash increased on 8.8%.
SmarTone Telecommunications Holdings Ltd has no short term refinancing risk: cash is higher than short term debt (279.2%).
Valuation and dividends
The company's trades at EV/EBITDA 2.4x and P/E 12.5x.
Financial and operational results
FY ended 30/06/2020
SmarTone Telecommunications Holdings Ltd ($315) key annual financial indicators| mln. HKD | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 18,356 | 8,715 | 9,988 | 8,415 | 6,986 | -17.0% |
| EBITDA | 2,663 | 2,292 | 2,130 | 1,764 | 2,273 | 28.8% |
| Net Income | 797 | 672 | 615 | 632 | 379 | -40.1% |
Balance Sheet
|
|---|
| Cash | 2,899 | 1,147 | 1,732 | 1,956 | 2,127 | 8.8% |
| Short Term Debt | 126 | 134 | 136 | 430 | 762 | 77.0% |
| Long Term Debt | 2,724 | 2,557 | 2,295 | 1,873 | 2,003 | 7.0% |
Cash flow
|
|---|
| Capex | 606 | 575 | 623 | 519 | 540 | 4.0% |
Ratios
|
|---|
| Revenue growth | -1.6% | -52.5% | 14.6% | -15.8% | -17.0% | |
| EBITDA growth | -8.8% | -13.9% | -7.1% | -17.2% | 28.8% | |
|
|---|
| EBITDA Margin | 14.5% | 26.3% | 21.3% | 21.0% | 32.5% | 11.6% |
| Net Income Margin | 4.3% | 7.7% | 6.2% | 7.5% | 5.4% | -2.1% |
| CAPEX, % of revenue | 3.3% | 6.6% | 6.2% | 6.2% | 7.7% | 1.6% |
|
|---|
| ROIC | 14.5% | 11.8% | 10.9% | 10.4% | 6.4% | -4.0% |
| ROE | 19.5% | 15.1% | 13.1% | 12.8% | 7.5% | -5.3% |
| Net Debt/EBITDA | -0.0x | 0.7x | 0.3x | 0.2x | 0.3x | 0.1x |
Peers in Telecommunications
Below we provide SmarTone Telecommunications Holdings 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 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Vision Values Holdings Ltd ($862) | 19.6% | -15.7% | 36.7% | 78.0% | - |
| Cisco Systems Inc ($4333) | 0.2% | -2.5% | 2.8% | 5.2% | - |
| |
|---|
| Median (2 companies) | -2.5% | -2.5% | 19.7% | 41.6% | - |
|---|
| SmarTone Telecommunications Holdings Ltd ($315) | - | -52.5% | 14.6% | -15.8% | -17.0% |
Top companies by Gross margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Cisco Systems Inc ($4333) | 62.9% | 63.0% | 62.0% | 62.9% | - |
| |
|---|
| Median (1 company) | 33.5% | 37.9% | 62.0% | 62.9% | - |
|---|
Top companies by EBITDA margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Cisco Systems Inc ($4333) | 30.1% | 29.7% | 29.4% | 31.0% | - |
| Vision Values Holdings Ltd ($862) | -112.0% | -217.1% | 25.1% | -166.5% | - |
| |
|---|
| Median (2 companies) | 7.2% | 4.0% | 27.3% | -67.7% | - |
|---|
| SmarTone Telecommunications Holdings Ltd ($315) | 14.5% | 26.3% | 21.3% | 21.0% | 32.5% |
Top companies by CAPEX/Revenue, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Vision Values Holdings Ltd ($862) | 72.5% | 33.1% | 42.5% | 43.2% | - |
| Cisco Systems Inc ($4333) | 2.3% | 2.0% | 1.7% | 1.8% | - |
| |
|---|
| Median (2 companies) | 8.4% | 2.0% | 22.1% | 22.5% | - |
|---|
| SmarTone Telecommunications Holdings Ltd ($315) | 3.3% | 6.6% | 6.2% | 6.2% | 7.7% |
Top companies by ROIC, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Cisco Systems Inc ($4333) | 14.6% | 12.9% | 15.1% | 23.2% | - |
| Vision Values Holdings Ltd ($862) | -9.1% | -11.5% | 1.3% | -17.6% | - |
| |
|---|
| Median (2 companies) | 5.2% | 9.8% | 8.2% | 2.8% | - |
|---|
| SmarTone Telecommunications Holdings Ltd ($315) | 14.5% | 11.8% | 10.9% | 10.4% | 6.4% |
Top companies by Net Debt / EBITDA
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Cisco Systems Inc ($4333) | 1.4x | 1.5x | 1.1x | 0.8x | - |
| |
|---|
| Median (1 company) | 1.7x | -1.0x | -4.1x | 0.8x | - |
|---|
| SmarTone Telecommunications Holdings Ltd ($315) | -0.0x | 0.7x | 0.3x | 0.2x | 0.3x |
