Sun Hung Kai Properties Ltd CAPEX jumped on 292% while Revenue decreased on 3.1%
10/09/2020 • About Sun Hung Kai Properties Ltd (
$16) • By InTwits
Sun Hung Kai Properties Ltd reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
- Sun Hung Kai Properties Ltd has high CAPEX intensity: 5 year average CAPEX/Revenue was 24.1%.
- CAPEX is quite volatile: 49,264 HKDm in FY2020, 12,560 HKDm in FY2019, 23,187 HKDm in FY2018, 9,198 HKDm in FY2017, 6,634 HKDm in FY2016
- The company has potentially unprofitable business model: ROIC is 4.3%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Sun Hung Kai Properties Ltd's Revenue decreased on 3.1%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 19.4 pp from 62.2% to 42.8% in FY2020. During FY2016-FY2020 EBITDA Margin topped in FY2019 at 62.2%.
Gross Margin decreased slightly on 1.6 pp from 52.6% to 51.0% in FY2020. Gross Margin followed a growing trend at 3.3 pp per annum in FY2016-FY2020. SG&A as a % of Revenue showed almost no change in FY2020.
Net Income margin dropped on 24.2 pp from 52.9% to 28.7% in FY2020. During FY2016-FY2020 Net Income margin topped in FY2018 at 58.5% and was declining since that time.
Investments (CAPEX, working capital and M&A)
In FY2020 the company had CAPEX/Revenue of 59.6%. The company's CAPEX/Revenue surged on 47.8 pp from 11.8% in FY2017 to 59.6% in FY2020. It's average level of CAPEX/Revenue for the last three years was 33.8%. The company has spent a lot to CAPEX (139% of EBITDA) which didn't stop revenue from falling.
Return on investment
The company operates at low ROIC (4.3%) and ROE (4.1%). ROIC decreased on 3.0 pp from 7.3% to 4.3% in FY2020. ROE decreased on 4.0 pp from 8.1% to 4.1% in FY2020. During the last 5 years ROIC topped in FY2018 at 8.0% and was declining since that time. During FY2016-FY2020 ROE topped in FY2018 at 9.6% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.3x and Debt / EBITDA is 3.2x. Net Debt / EBITDA jumped on 0.9x from 1.4x to 2.3x in FY2020. Debt jumped on 18.5% while cash surged on 43.9%. During FY2016-FY2020 Net Debt/EBITDA bottomed in FY2017 at 0.8x and was growing since that time.
Sun Hung Kai Properties Ltd has no short term refinancing risk: cash is higher than short term debt (120.2%).
Valuation and dividends
Sun Hung Kai Properties Ltd's trades at EV/EBITDA 10.6x and P/E 12.4x.
Management team
The company's CEO Kwok Ping Luen "Raymond" has spent 30 years with the company.
Financial and operational results
FY ended 30/06/2020
Sun Hung Kai Properties Ltd ($16) key annual financial indicators| mln. HKD | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 91,184 | 78,207 | 85,644 | 85,302 | 82,653 | -3.1% |
| Gross Profit | 34,739 | 35,774 | 41,892 | 44,847 | 42,136 | -6.0% |
| SG&A | 6,646 | 7,175 | 7,595 | 7,729 | 7,512 | -2.8% |
| EBITDA | 39,353 | 45,050 | 52,977 | 53,067 | 35,413 | -33.3% |
| Net Income | 32,666 | 41,800 | 50,125 | 45,083 | 23,690 | -47.5% |
Balance Sheet
|
|---|
| Cash | 30,048 | 31,274 | 26,095 | 22,038 | 31,705 | 43.9% |
| Short Term Debt | 17,486 | 5,390 | 12,646 | 9,168 | 26,375 | 187.7% |
| Long Term Debt | 63,275 | 61,936 | 78,788 | 85,838 | 86,231 | 0.5% |
Cash flow
|
|---|
| Capex | 6,634 | 9,198 | 23,187 | 12,560 | 49,264 | 292.2% |
Ratios
|
|---|
| Revenue growth | 36.5% | -14.2% | 9.5% | -0.4% | -3.1% | |
| EBITDA growth | 10.7% | 14.5% | 17.6% | 0.2% | -33.3% | |
|
|---|
| Gross Margin | 38.1% | 45.7% | 48.9% | 52.6% | 51.0% | -1.6% |
| EBITDA Margin | 43.2% | 57.6% | 61.9% | 62.2% | 42.8% | -19.4% |
| SG&A, % of revenue | 7.3% | 9.2% | 8.9% | 9.1% | 9.1% | 0.0% |
| Net Income Margin | 35.8% | 53.4% | 58.5% | 52.9% | 28.7% | -24.2% |
| CAPEX, % of revenue | 7.3% | 11.8% | 27.1% | 14.7% | 59.6% | 44.9% |
|
|---|
| ROIC | 6.5% | 7.3% | 8.0% | 7.3% | 4.3% | -3.0% |
| ROE | 7.1% | 8.6% | 9.6% | 8.1% | 4.1% | -4.0% |
| Net Debt/EBITDA | 1.3x | 0.8x | 1.2x | 1.4x | 2.3x | 0.9x |
Peers in Real Estate
Below we provide Sun Hung Kai Properties Ltd benchmarking against other companies in Real Estate 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 |
|---|
| New World Development Co Ltd ($17) | 7.8% | -4.9% | 7.2% | 26.5% | - |
| China Motor Bus Co Ltd ($26) | -5.2% | -10.8% | 4.5% | 3.5% | - |
| Dynamic Holdings Ltd ($29) | 0.4% | -2.0% | 11.1% | -6.0% | - |
| |
|---|
| Median (3 companies) | 9.9% | 6.6% | 7.2% | 3.5% | - |
|---|
| Sun Hung Kai Properties Ltd ($16) | - | -14.2% | 9.5% | -0.4% | -3.1% |
Top companies by Gross margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Dynamic Holdings Ltd ($29) | 80.8% | 78.3% | 78.5% | 76.1% | - |
| New World Development Co Ltd ($17) | 31.1% | 32.2% | 33.9% | 32.6% | - |
| |
|---|
| Median (2 companies) | 42.3% | 36.1% | 56.2% | 54.3% | - |
|---|
| Sun Hung Kai Properties Ltd ($16) | 38.1% | 45.7% | 48.9% | 52.6% | 51.0% |
Top companies by EBITDA margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| China Motor Bus Co Ltd ($26) | 88.9% | 64.4% | 62.1% | 58.3% | - |
| New World Development Co Ltd ($17) | 32.8% | 24.0% | 55.0% | 36.0% | - |
| Dynamic Holdings Ltd ($29) | 57.3% | 144.1% | 130.0% | 23.2% | - |
| |
|---|
| Median (3 companies) | 29.0% | 37.7% | 62.1% | 36.0% | - |
|---|
| Sun Hung Kai Properties Ltd ($16) | 43.2% | 57.6% | 61.9% | 62.2% | 42.8% |
Top companies by CAPEX/Revenue, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| New World Development Co Ltd ($17) | 15.0% | 28.5% | 16.4% | 13.2% | - |
| Dynamic Holdings Ltd ($29) | 0.1% | 0.8% | 0.1% | 1.1% | - |
| China Motor Bus Co Ltd ($26) | 0.3% | 0.2% | 0.2% | 0.2% | - |
| |
|---|
| Median (3 companies) | 3.3% | 2.2% | 0.2% | 1.1% | - |
|---|
| Sun Hung Kai Properties Ltd ($16) | 7.3% | 11.8% | 27.1% | 14.7% | 59.6% |
Top companies by ROIC, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| New World Development Co Ltd ($17) | 5.0% | 3.2% | 7.7% | 5.8% | - |
| Dynamic Holdings Ltd ($29) | 2.4% | 5.8% | 5.5% | 0.9% | - |
| China Motor Bus Co Ltd ($26) | 1.1% | 0.7% | 0.6% | 0.5% | - |
| |
|---|
| Median (3 companies) | 3.4% | 7.2% | 5.5% | 0.9% | - |
|---|
| Sun Hung Kai Properties Ltd ($16) | 6.5% | 7.3% | 8.0% | 7.3% | 4.3% |
Top companies by Net Debt / EBITDA
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| New World Development Co Ltd ($17) | 4.1x | 5.9x | 2.3x | 3.3x | - |
| Dynamic Holdings Ltd ($29) | -1.6x | -0.8x | -0.8x | -6.2x | - |
| China Motor Bus Co Ltd ($26) | -23.3x | -37.0x | -30.2x | -33.5x | - |
| |
|---|
| Median (3 companies) | 2.9x | 1.4x | -0.8x | -6.2x | - |
|---|
| Sun Hung Kai Properties Ltd ($16) | 1.3x | 0.8x | 1.2x | 1.4x | 2.3x |
