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New World Development Co Ltd Net Income dropped on 85.3% and Revenue dropped on 23.1%

30/09/2020 • About New World Development Co Ltd ($17) • By InTwits

New World Development Co Ltd reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
  • EBITDA Margin is quite volatile: 26.7% in FY2020, 36.0% in FY2019, 55.0% in FY2018, 24.0% in FY2017, 32.8% in FY2016
  • The company has potentially unprofitable business model: ROIC is 2.5%
  • It operates with high leverage: Net Debt/EBITDA is 8.3x while industry average is 3.6x
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 23.1%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 9.4 pp from 36.0% to 26.7% in FY2020.

Gross Margin increased slightly on 1.2 pp from 32.6% to 33.8% in FY2020. SG&A as a % of Revenue increased on 4.3 pp from 11.0% to 15.4% in FY2020. During FY2016-FY2020 SG&A as a % of Revenue bottomed in FY2019 at 11.0%.

Net Income margin dropped on 20.0 pp from 24.7% to 4.7% in FY2020.

Return on investment


The company operates at low ROIC (2.5%) and ROE (0.5%). ROIC decreased on 3.3 pp from 5.8% to 2.5% in FY2020. ROE decreased on 7.8 pp from 8.3% to 0.50% in FY2020.

Leverage (Debt)


Debt level is 8.3x Net Debt / EBITDA and 12.6x Debt / EBITDA. Net Debt / EBITDA surged on 5.0x from 3.3x to 8.3x in FY2020. Debt jumped on 26.9% while cash increased on 5.6%.

New World Development Co Ltd has no short term refinancing risk: cash is higher than short term debt (116.4%).

Valuation and dividends


The company's trades at EV/EBITDA 14.7x and P/E 35.8x.

Management team


The company's CEO Cheng Chi-Kong "Adrian" has spent 6 months with the company.

Financial and operational results


New World Development Co Ltd ($17) key annual financial indicators

mln. HKD201620172018201920202020/2019
P&L
Revenue59,57056,62960,68976,76459,008-23.1%
Gross Profit18,52218,21620,56325,02219,931-20.3%
SG&A9,6248,7869,2268,4609,0597.1%
EBITDA19,55113,60833,38627,65115,735-43.1%
Net Income8,6668,07223,87518,9632,785-85.3%
Balance Sheet
Cash54,96566,98663,38863,72967,2915.6%
Short Term Debt20,09021,22520,62941,77657,82938.4%
Long Term Debt114,842125,895120,124114,559140,54722.7%
Cash flow
Capex8,92116,1589,97010,145
Ratios
Revenue growth7.8%-4.9%7.2%26.5%-23.1%
EBITDA growth-35.2%-30.4%145.3%-17.2%-43.1%

Gross Margin31.1%32.2%33.9%32.6%33.8%1.2%
EBITDA Margin32.8%24.0%55.0%36.0%26.7%-9.4%
SG&A, % of revenue16.2%15.5%15.2%11.0%15.4%4.3%
Net Income Margin14.5%14.3%39.3%24.7%4.7%-20.0%
CAPEX, % of revenue15.0%28.5%16.4%13.2%

ROIC5.0%3.2%7.7%5.8%2.5%-3.3%
ROE4.8%4.2%11.6%8.3%0.5%-7.8%
Net Debt/EBITDA4.1x5.9x2.3x3.3x8.3x5.0x

Peers in Real Estate


Below you can find New World Development Co Ltd benchmarking vs. other companies in Real Estate 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
Sun Hung Kai Properties Ltd ($16)--14.2%9.5%-0.4%-3.1%
China Motor Bus Co Ltd ($26)--10.8%4.5%3.5%-6.2%
Dynamic Holdings Ltd ($29)--2.0%11.1%-6.0%-13.3%
 
Median (3 companies)10.6%6.6%9.5%-0.4%-6.2%
New World Development Co Ltd ($17)--4.9%7.2%26.5%-23.1%


Top companies by Gross margin, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Dynamic Holdings Ltd ($29)80.8%78.3%78.5%76.1%71.2%
Sun Hung Kai Properties Ltd ($16)38.1%45.7%48.9%52.6%51.0%
 
Median (2 companies)42.3%40.3%63.7%64.3%61.1%
New World Development Co Ltd ($17)31.1%32.2%33.9%32.6%33.8%


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%59.3%
Sun Hung Kai Properties Ltd ($16)43.2%57.6%61.9%62.2%42.8%
Dynamic Holdings Ltd ($29)57.3%144.1%130.0%23.2%-68.9%
 
Median (3 companies)29.0%48.5%62.1%58.3%42.8%
New World Development Co Ltd ($17)32.8%24.0%55.0%36.0%26.7%


Top companies by CAPEX/Revenue, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Sun Hung Kai Properties Ltd ($16)7.3%11.8%27.1%14.7%59.6%
Dynamic Holdings Ltd ($29)0.1%0.8%0.1%1.1%0.2%
China Motor Bus Co Ltd ($26)0.3%0.2%0.2%0.2%0.3%
 
Median (3 companies)3.3%2.2%0.2%1.1%0.3%
New World Development Co Ltd ($17)15.0%28.5%16.4%13.2%-


Top companies by ROIC, %

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Sun Hung Kai Properties Ltd ($16)6.5%7.3%8.0%7.3%4.3%
China Motor Bus Co Ltd ($26)1.1%0.7%0.6%0.5%0.5%
Dynamic Holdings Ltd ($29)2.4%5.8%5.5%0.9%-2.6%
 
Median (3 companies)3.4%7.9%5.5%0.9%0.5%
New World Development Co Ltd ($17)5.0%3.2%7.7%5.8%2.5%


Top companies by Net Debt / EBITDA

Top  FY2016 FY2017 FY2018 FY2019 FY2020
Sun Hung Kai Properties Ltd ($16)1.3x0.8x1.2x1.4x2.3x
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-56.8x
 
Median (3 companies)2.7x1.0x-0.8x-6.2x-27.3x
New World Development Co Ltd ($17)4.1x5.9x2.3x3.3x8.3x