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Kantone Holdings Ltd reports 13.0% EBITDA growth in 2020 and 0.61 pp EBITDA Margin growth from 5.7% to 6.3%

30/09/2020 • About Kantone Holdings Ltd ($1059) • By InTwits

Kantone Holdings Ltd reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
  • Kantone Holdings Ltd spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for FY2016-FY2020 is 0.0%. Average EBITDA Margin for the same period was -84.7%
  • The company has potentially unprofitable business model: ROIC is 2.8%
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 increased on 2.1%. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased slightly on 0.61 pp from 5.7% to 6.3% in FY2020. During FY2016-FY2020 EBITDA Margin bottomed in FY2017 at -1,236% and was growing since that time.

Gross Margin decreased slightly on 2.0 pp from 58.5% to 56.6% in FY2020. During FY2016-FY2020 Gross Margin topped in FY2019 at 58.5%. SG&A as a % of Revenue showed almost no change in FY2020.

Net Income margin increased slightly on 0.94 pp from 1.7% to 2.6% in FY2020. During FY2016-FY2020 Net Income margin bottomed in FY2017 at -1,247% and was growing since that time.

Return on investment


The company operates at low ROIC (2.8%) and ROE (6.4%). ROIC increased slightly on 0.58 pp from 2.2% to 2.8% in FY2020. ROE increased on 2.9 pp from 3.5% to 6.4% in FY2020. During the last 5 years ROIC bottomed in FY2018 at -188% and was growing since that time. During the last 5 years ROE bottomed in FY2018 at -188% and was growing since that time.

Leverage (Debt)


Company's Net Debt / EBITDA is -9.8x and Debt / EBITDA is 0.4x. Debt surged while cash surged on 14.5%.

Kantone Holdings Ltd has no short term refinancing risk: cash is higher than short term debt (4,385.5%).

Financial and operational results


Kantone Holdings Ltd ($1059) key annual financial indicators

mln. HKD201620172018201920202020/2019
P&L
Revenue2,0901411371441472.1%
Gross Profit71673768483-1.4%
SG&A84778183862.8%
EBITDA1,107-1,741-1,6378913.0%
Net Income-12-1,757-1,6442459.0%
Balance Sheet
Cash747672839514.5%
Short Term Debt44002
Long Term Debt40002
Cash flow
Capex10767
Ratios
Revenue growth-17.8%-93.3%-2.9%5.3%2.1%
EBITDA growth105.6%-257.2%-6.0%-100.5%13.0%

Gross Margin34.3%51.8%55.6%58.5%56.6%-2.0%
EBITDA Margin53.0%-1,235.9%-1,196.9%5.7%6.3%0.6%
SG&A, % of revenue4.0%54.8%59.3%57.8%58.2%0.4%
Net Income Margin-0.6%-1,247.1%-1,202.2%1.7%2.6%0.9%
CAPEX, % of revenue0.5%5.1%4.6%4.6%

ROIC17.4%-68.6%-187.8%2.2%2.8%0.6%
ROE-0.3%-68.7%-188.1%3.5%6.4%2.9%
Net Debt/EBITDA-0.1x-10.1x-9.8x0.3x

Peers in Software


Below you can find Kantone Holdings Ltd benchmarking vs. other companies in Software 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  FY2016 FY2017 FY2018 FY2019 FY2020
International Entertainment Corp ($1009)--12.2%1.9%26.9%-39.6%
 
Median (1 company)21.5%-3.1%8.1%26.9%-39.6%
Kantone Holdings Ltd ($1059)--93.3%-2.9%5.3%2.1%


Top companies by Gross margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
International Entertainment Corp ($1009)46.6%74.5%76.0%71.8%65.4%
 
Median (1 company)39.9%69.5%70.6%71.8%65.4%
Kantone Holdings Ltd ($1059)34.3%51.8%55.6%58.5%56.6%


Top companies by EBITDA margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
International Entertainment Corp ($1009)45.5%-2.8%-8.2%4.2%-51.7%
 
Median (1 company)2.8%18.8%17.2%4.2%-51.7%
Kantone Holdings Ltd ($1059)53.0%-1,235.9%-1,196.9%5.7%6.3%


Top companies by CAPEX/Revenue, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
International Entertainment Corp ($1009)3.3%6.8%3.4%30.2%15.2%
 
Median (1 company)0.8%7.6%7.0%30.2%15.2%
Kantone Holdings Ltd ($1059)0.5%5.1%4.6%4.6%-


Top companies by ROIC, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
International Entertainment Corp ($1009)0.5%-1.8%-2.1%-2.5%-8.8%
 
Median (1 company)4.1%7.8%8.7%-2.5%-8.8%
Kantone Holdings Ltd ($1059)17.4%-68.6%-187.8%2.2%2.8%


Top companies by Net Debt / EBITDA

Top  FY2016 FY2017 FY2018 FY2019 FY2020
International Entertainment Corp ($1009)-7.8x--8.1x-
 
Median (1 company)-1.0x2.2x1.6x8.1x-
Kantone Holdings Ltd ($1059)-0.1x---10.1x-9.8x