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NWS Holdings Ltd reports 80.3% Net Income decline in 2020 and 3.4% Revenue decline

30/09/2020 • About NWS Holdings Ltd ($659) • By InTwits

NWS 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: 3.9% in FY2020, 13.9% in FY2019, 17.6% in FY2018, 14.2% in FY2017, 17.1% in FY2016
  • The company has unprofitable business model: ROIC is -0.5%
  • It operates with high leverage: Net Debt/EBITDA is 19.3x while industry average is 6.0x
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 decreased on 3.4%. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 10.0 pp from 13.9% to 3.9% in FY2020.

Gross Margin decreased slightly on 1.6 pp from 11.3% to 9.7% in FY2020. SG&A as a % of Revenue increased on 4.5 pp from 5.3% to 9.8% in FY2020. SG&A as a % of Revenue followed a growing trend in the last 5 years.

Net Income margin dropped on 12.5 pp from 15.8% to 3.2% in FY2020. During the last 5 years Net Income margin topped in FY2017 at 17.9% and was declining since that time.

Return on investment

The company operates at negative ROIC (-0.5%) and low but positive ROE (0.4%). ROIC decreased on 3.7 pp from 3.3% to -0.46% in FY2020. ROE decreased on 7.1 pp from 7.6% to 0.44% in FY2020. During FY2016-FY2020 ROE topped in FY2018 at 12.3% and was declining since that time.

Leverage (Debt)

Debt level is 19.3x Net Debt / EBITDA and 32.2x Debt / EBITDA. Net Debt / EBITDA jumped on 19.3x from 0.0064x to 19.3x in FY2020. Debt jumped on 118% while cash dropped on 12.1%. During FY2016-FY2020 Net Debt/EBITDA bottomed in FY2019 at 0.0064x.

NWS Holdings Ltd has no short term refinancing risk: cash is higher than short term debt (297.7%).

Valuation and dividends

The company's trades at EV/EBITDA 43.1x and P/E 29.1x.

Management team

NWS Holdings Ltd's CEO is Ma Siu-Cheung "Eric". Ma Siu-Cheung "Eric" has 1 year tenure with the company.

Financial and operational results

NWS Holdings Ltd ($659) key annual financial indicators

mln. HKD201620172018201920202020/2019
Gross Profit3,3533,6223,7833,0432,521-17.2%
Net Income4,9135,6296,0694,230835-80.3%
Balance Sheet
Short Term Debt5,8133061,0352,4034,44184.8%
Long Term Debt9,2529,3779,14012,66628,467124.7%
Cash flow
Revenue growth20.4%6.4%11.9%-23.6%-3.4%
EBITDA growth12.0%-11.8%38.6%-39.5%-72.7%

Gross Margin11.4%11.5%10.8%11.3%9.7%-1.6%
EBITDA Margin17.1%14.2%17.6%13.9%3.9%-10.0%
SG&A, % of revenue3.7%4.1%4.2%5.3%9.8%4.5%
Net Income Margin16.7%17.9%17.3%15.8%3.2%-12.5%
CAPEX, % of revenue1.9%2.2%0.0%0.0%

Net Debt/EBITDA1.2x0.7x0.6x0.0x19.3x19.3x

Peers in Holding Companies-Divers

Below we provide NWS Holdings Ltd benchmarking against other companies in Holding Companies-Divers 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.