Kt Corp CAPEX decreased on 7.4% and Revenue showed almost no change
12 Feb 2019 • About Kt Corp (
$KTCD) • By InTwits
Kt Corp reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Kt Corp has high CAPEX intensity: 5 year average CAPEX/Revenue was 11.7%. At the same time it's a lot of higher than industry average of 7.9%.
- CAPEX is quite volatile: 3,226,486 KRWm in 2018, 3,055,023 KRWm in 2017, 2,971,161 KRWm in 2016, 8,141,729 KRWm in 2015, 3,353,809 KRWm in 2014
- The company has potentially unprofitable business model: ROIC is 6.0%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Kt Corp's Revenue showed almost no change in 2018. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased slightly on 0.77 pp from 6.9% to 7.7% in 2018. During the last 5 years EBITDA Margin topped in 2015 at 22.1% and was declining since that time.
Gross Margin showed almost no change in 2018. Gross Margin followed a growing trend at 1.6 pp per annum in the last 5 years. SG&A as a % of Revenue showed almost no change in 2018. During the last 5 years SG&A as a % of Revenue bottomed in 2015 at 55.8% and was growing since that time.
Net Income margin increased slightly on 0.90 pp from 2.0% to 2.9% in 2018. The efficient tax rate was 32.3% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 9.6%. Kt Corp showed decline in CAPEX/Revenue of 4.3 pp from 14.0% in 2015 to 9.6% in 2018. It's average level of CAPEX/Revenue for the last three years was 10.7%. During 2014-2018 CAPEX as a % of Revenue topped in 2015 at 14.0% and was declining since that time.
Return on investment
The company operates at low ROIC (6.0%) and ROE (5.5%). ROIC decreased slightly on 0.68 pp from 6.7% to 6.0% in 2018. ROE increased slightly on 1.4 pp from 4.1% to 5.5% in 2018. During the last 5 years ROIC topped in 2016 at 6.9% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.9x and Debt / EBITDA is 1.5x. Net Debt / EBITDA dropped on 0.1x from 1.0x to 0.9x in 2018. Debt decreased slightly on 0.66% while cash surged on 40.2%. Net Debt/EBITDA followed a declining trend in the last 5 years.
Kt Corp has good short term financial stability: Interest coverage ratio (ICR) is 4.2x. Kt Corp has no short term refinancing risk: cash is higher than short term debt (187.7%).
Average interest expence paid by the company was 4.4% in 2018.
The company paid 43.4% of Net Income as dividends in 2018.
Management team
Kt Corp's CEO is Hwang Chang-Gyu. Hwang Chang-Gyu has 6 years tenure with the company. CEO total compensation was 1,449,000,000 KRW in 2018 which included 573,000,000 KRW salary and 868,000,000 KRW annual bonus. Kt Corp's CFO Yoon Kyung-Keun has spent 5 years with the company.
Financial and operational results
FY ended 31 Dec 2018
Kt Corp ($KTCD) key annual financial indicators| mln. KRW | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 23,421,673 | 22,281,221 | 22,743,665 | 23,387,267 | 23,460,143 | 0.3% |
| Gross Profit | 18,253,547 | 17,352,326 | 17,851,742 | 19,521,013 | 19,478,656 | -0.2% |
| SG&A | 14,416,989 | 12,439,028 | 12,898,616 | 14,612,590 | 14,758,644 | 1.0% |
| EBITDA | 3,492,087 | 4,919,480 | 4,861,479 | 4,812,967 | 4,581,808 | -4.8% |
| EBIT | | | | | 1,261,522 | |
| Interest expence | | | | | 296,873 | |
| Tax | | | | | 328,437 | |
| Net Income | -1,055,000 | 552,964 | 711,089 | 476,744 | 688,464 | 44.4% |
Balance Sheet
|
|---|
| Cash | 1,885,345 | 2,550,431 | 2,880,391 | 1,911,345 | 2,679,452 | 40.2% |
| Inventory | | | | | 683,998 | |
| Short Term Debt | 2,975,799 | 1,787,273 | 1,884,009 | 1,642,125 | 1,427,805 | -13.1% |
| Long Term Debt | 9,894,593 | 7,003,821 | 6,417,496 | 5,110,188 | 5,279,812 | 3.3% |
Cash flow
|
|---|
| Capex | 2,852,869 | 3,115,728 | 2,764,346 | 2,442,223 | 2,260,879 | -7.4% |
| Dividends | | | | | 298,632 | |
Ratios
|
|---|
| Revenue growth | -1.6% | -4.9% | 2.1% | 2.8% | 0.3% | |
| EBITDA growth | -21.7% | 40.9% | -1.2% | -1.0% | -4.8% | |
|
|---|
| Gross Margin | 77.9% | 77.9% | 78.5% | 83.5% | 83.0% | -0.4% |
| EBITDA Margin | 14.9% | 22.1% | 21.4% | 20.6% | 19.5% | -1.0% |
| EBIT Margin | | | | | 5.4% |
| SG&A, % of revenue | 61.6% | 55.8% | 56.7% | 62.5% | 62.9% | 0.4% |
| Net Income Margin | -4.5% | 2.5% | 3.1% | 2.0% | 2.9% | 0.9% |
| CAPEX, % of revenue | 12.2% | 14.0% | 12.2% | 10.4% | 9.6% | -0.8% |
|
|---|
| ROIC | -1.5% | 5.7% | 6.9% | 6.7% | 6.0% | -0.7% |
| ROE | -9.5% | 5.2% | 6.4% | 4.1% | 5.5% | 1.4% |
| Net Debt/EBITDA | 3.1x | 1.3x | 1.1x | 1.0x | 0.9x | -0.1x |
| Interest coverage ratio (ICR) | | | | | 4.2x |
| Interest expence / Average debt | | | | | 4.4% | |
Peers in Fixed Line Telecommunications
Below you can find Kt Corp benchmarking vs. other companies in Fixed Line Telecommunications 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 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Telecom Egypt ($TEEG) | | 0.2% | 14.5% | 33.1% | |
| BT Group ($BT.A) | | -1.7% | 5.7% | 26.6% | -1.4% |
| Adept Telecom ($ADT) | | 5.8% | 30.9% | 19.2% | 34.8% |
| Rostelekom ($RKMD) | | -0.5% | 0.0% | 2.7% | |
| Ooredoo Qsc ($ORDS) | -1.9% | -3.2% | 1.1% | 0.7% | |
| |
|---|
| Median (11 companies) | 7.8% | -0.4% | 0.1% | 0.3% | 2.4% |
|---|
| Kt Corp ($KTCD) | | -4.9% | 2.1% | 2.8% | 0.3% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Koninklijke Kpn Nv ($0O8F) | | | 68.7% | 70.4% | |
| Verizon Communications Inc ($VZC) | 60.7% | 60.1% | 59.2% | 59.1% | 57.6% |
| O2 Czech Republic As ($O2CZ) | | | 48.5% | 48.7% | 49.9% |
| Adept Telecom ($ADT) | 36.4% | 37.6% | 40.3% | 42.3% | 49.4% |
| Telecom Egypt ($TEEG) | 44.2% | 41.6% | 43.2% | 39.6% | |
| |
|---|
| Median (5 companies) | 43.6% | 41.3% | 45.9% | 48.7% | 49.9% |
|---|
| Kt Corp ($KTCD) | 77.9% | 77.9% | 78.5% | 83.5% | 83.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Ooredoo Qsc ($ORDS) | 37.6% | 39.2% | 39.2% | 40.5% | |
| Koninklijke Kpn Nv ($0O8F) | 39.1% | 33.2% | 35.7% | 35.5% | |
| Verizon Communications Inc ($VZC) | 28.4% | 37.3% | 34.1% | 35.2% | 30.3% |
| Hellenic Telecom.Organization S.A. ($OTES) | 35.4% | 31.3% | 32.4% | 32.2% | |
| Telefonica Sa ($TDE) | 31.7% | 24.1% | 29.1% | 31.1% | |
| |
|---|
| Median (11 companies) | 31.9% | 29.9% | 30.6% | 31.0% | 28.5% |
|---|
| Kt Corp ($KTCD) | 14.9% | 22.1% | 21.4% | 20.6% | 19.5% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Telecom Egypt ($TEEG) | 13.0% | 21.4% | 23.7% | 32.8% | |
| Hellenic Telecom.Organization S.A. ($OTES) | 15.4% | 16.9% | 16.7% | 23.8% | |
| Rostelekom ($RKMD) | 19.3% | 21.1% | 20.8% | 19.9% | |
| Telefonica Sa ($TDE) | 19.1% | 18.7% | 17.7% | 17.3% | |
| Orange Polska Sa ($OPLD) | 17.6% | 16.9% | 44.8% | 17.0% | |
| |
|---|
| Median (11 companies) | 13.0% | 14.4% | 15.1% | 13.7% | 8.3% |
|---|
| Kt Corp ($KTCD) | 12.2% | 14.0% | 12.2% | 10.4% | 9.6% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| O2 Czech Republic As ($O2CZ) | 7.2% | 14.5% | 26.8% | 25.8% | 24.3% |
| BT Group ($BT.A) | 34.7% | 37.5% | 20.7% | 13.9% | 15.4% |
| Adept Telecom ($ADT) | 13.2% | 14.3% | 16.5% | 14.2% | 14.1% |
| Verizon Communications Inc ($VZC) | 10.1% | 19.3% | 15.4% | 14.8% | 11.3% |
| Hellenic Telecom.Organization S.A. ($OTES) | 10.4% | 7.1% | 7.1% | 5.7% | |
| |
|---|
| Median (9 companies) | 8.7% | 8.2% | 7.8% | 8.3% | 14.7% |
|---|
| Kt Corp ($KTCD) | -1.5% | 5.7% | 6.9% | 6.7% | 6.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Telefonica Sa ($TDE) | 3.6x | 4.2x | 3.6x | 3.0x | |
| Koninklijke Kpn Nv ($0O8F) | 3.0x | 3.6x | 3.1x | 2.9x | |
| Verizon Communications Inc ($VZC) | 2.8x | 2.1x | 2.4x | 2.6x | 2.8x |
| Orange Polska Sa ($OPLD) | 1.0x | 1.2x | 5.1x | 2.3x | |
| Adept Telecom ($ADT) | 0.7x | 0.3x | 1.0x | 2.2x | 2.3x |
| |
|---|
| Median (11 companies) | 1.4x | 1.2x | 1.9x | 2.0x | 2.2x |
|---|
| Kt Corp ($KTCD) | 3.1x | 1.3x | 1.1x | 1.0x | 0.9x |
