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Mega Expo Holdings Ltd reports 29.0% Net Income growth in 2020 while 4.3% Revenue decline

25/09/2020 • About Mega Expo Holdings Ltd ($1360) • By InTwits

Mega Expo Holdings Ltd reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
  • EBITDA Margin is quite volatile: 48.8% in FY2020, 39.5% in FY2019, 47.6% in FY2018, -6.0% in FY2017, -11.3% in FY2016
  • Mega Expo Holdings Ltd has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.3%. At the same time it's a lot of higher than industry average of 6.5%.
  • CAPEX is quite volatile: 1 m in FY2020, 2 m in FY2019, 0 m in FY2018, 6 m in FY2017, 8 m in FY2016
  • In the last 5 years the company invested considerably less than D&A: 17 m vs. 58 m. In FY2020 this situation was still the same: CAPEX was 1 while D&A was 21
  • The company has highly profitable business model: ROIC is 25.6%
  • It operates with medium-size leverage: Net Debt/EBITDA is 0.7x while industry average is -1.9x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

Mega Expo Holdings Ltd's Revenue decreased on 4.3%. Revenue decline happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 9.3 pp from 39.5% to 48.8% in FY2020. EBITDA Margin followed a growing trend at 16.6 pp per annum in the last 5 years.

Gross Margin dropped on 14.8 pp from 66.5% to 51.7% in FY2020. SG&A as a % of Revenue decreased on 7.0 pp from 22.7% to 15.7% in FY2020. Stock Based Compensation (SBC) as a % of Revenue decreased on 7.3 pp from 10.0% to 2.7% in FY2020.

Net Income margin increased on 6.4 pp from 18.4% to 24.9% in FY2020. The efficient tax rate was 33.2% in FY2020.

Investments (CAPEX, working capital and M&A)

The company's CAPEX/Revenue was 0.16% in FY2020. The company showed decline in CAPEX/Revenue of 5.6 pp from 5.8% in FY2017 to 0.16% in FY2020. Average CAPEX/Revenue for the last three years was 0.18%.

Accounts receivable as a % of Revenue increased on 2.7 pp from 29.7% to 32.5% in FY2020. Inventories as a % of Revenue increased slightly on 0.67 pp from 0.37% to 1.0% in FY2020. Accounts payable as a % of Revenue increased on 8.3 pp from 13.7% to 22.0% in FY2020.

Return on investment

The company operates at high and attractive ROIC (25.6%) and ROE (22.1%). ROIC decreased on 7.3 pp from 32.9% to 25.6% in FY2020. ROE showed almost no change in FY2020. During FY2016-FY2020 ROIC topped in FY2018 at 40.6% and was declining since that time. During the last 5 years ROE topped in FY2018 at 33.6% and was declining since that time.

Leverage (Debt)

Debt level is 0.7x Net Debt / EBITDA and 1.2x Debt / EBITDA. Net Debt / EBITDA increased on 0.1x from 0.6x to 0.7x in FY2020. Debt decreased on 8.1% while cash dropped on 35.5%.

Mega Expo Holdings Ltd has short term refinancing risk: cash is only 43.9% of short term debt.

Management team

At the end of financial year the company had 154 employees. The number of employees dropped on 16.3%. Average revenue per employee in FY2020 was 3,578,649 and it jumped on 14.3%.

Financial and operational results

FY ended 30/06/2020

Mega Expo Holdings Ltd ($1360) key annual financial indicators

mln. 201620172018201920202020/2019
Gross Profit54.3116.3383.3285.2-25.6%
Net Income-67.3-36.490.7106.3137.129.0%
Stock Based Compensation6.257.414.9-74.1%
Balance Sheet
Accounts Receivable3.9109.8171.3178.94.4%
Accounts Payable9.626.458.6121.6%
Short Term Debt0.
Long Term Debt0.00.02.6347.96.3-98.2%
Cash flow
Revenue growth-14.9%-35.8%146.8%126.8%-4.3%
EBITDA growth-218.6%-65.8%-2,047.5%88.2%18.2%

Gross Margin52.7%45.8%66.5%51.7%-14.8%
EBITDA Margin-11.3%-6.0%47.6%39.5%48.8%9.3%
EBIT Margin-21.0%43.4%37.5%45.1%7.6%
SG&A, % of revenue11.9%56.8%20.8%22.7%15.7%-7.0%
SBC, % of revenue2.4%10.0%2.7%-7.3%
Net Income Margin-42.0%-35.4%35.7%18.4%24.9%6.4%
CAPEX, % of revenue5.1%5.8%0.0%0.3%0.2%-0.2%

Net Debt/EBITDA-1.4x0.6x0.7x0.1x
Revenue/Employee, th. 4,4763,3873,1313,57914.3%

Peers in Commercial Services

Below we provide Mega Expo Holdings Ltd benchmarking against other companies in Commercial Services 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
Yat Sing Holdings Ltd ($3708)-3.0%5.2%-13.6%-6.3%-
Median (1 company)6.5%5.2%-13.6%-6.3%-
Mega Expo Holdings Ltd ($1360)--35.8%146.8%126.8%-4.3%

Top companies by Gross margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Yat Sing Holdings Ltd ($3708)9.2%8.8%9.4%7.5%-
Median (1 company)33.2%8.8%9.4%7.5%-
Mega Expo Holdings Ltd ($1360)-52.7%45.8%66.5%51.7%

Top companies by EBITDA margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Yat Sing Holdings Ltd ($3708)4.0%1.6%1.8%-1.7%-
Median (1 company)5.8%1.6%1.8%-1.7%-
Mega Expo Holdings Ltd ($1360)-11.3%-6.0%47.6%39.5%48.8%

Top companies by CAPEX/Revenue, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Yat Sing Holdings Ltd ($3708)0.3%0.2%0.1%0.0%-
Median (1 company)2.3%0.2%0.1%0.0%-
Mega Expo Holdings Ltd ($1360)5.1%5.8%0.0%0.3%0.2%

Top companies by ROIC, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Yat Sing Holdings Ltd ($3708)10.5%3.9%2.6%-4.3%-
Median (1 company)3.8%3.9%2.6%-4.3%-
Mega Expo Holdings Ltd ($1360)-19.1%-18.3%40.6%32.9%25.6%