After reading S Culture International Holdings Limited’s (SEHK:1255) latest earnings update (30 June 2017), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether 1255 has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways. See our latest analysis for 1255
Commentary On 1255’s Past Performance
For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend allows me to assess various companies in a uniform manner using new information. For S. Culture International Holdings, the most recent earnings -HK$40.4M, which, in comparison to the prior year’s figure, has become more negative. Since these figures may be fairly short-term, I’ve created an annualized five-year figure for 1255’s net income, which stands at -HK$0.5M. This doesn’t look much better, as earnings seem to have steadily been getting more and more negative over time.
We can further examine S. Culture International Holdings’s loss by looking at what has been happening in the industry on top of within the company. Firstly, I want to briefly look into the line items. Revenue growth over past couple of years has grown by a mere 3.57%. Given that top-line growth is also pretty stale the key to profitability in the future would be managing cost growth rates. Scanning growth from a sector-level, the HK specialty retail industry has been growing its average earnings by double-digit 21.17% in the previous year, . This is a turnaround from a volatile drop of -6.87% in the last few years. This suggests that whatever uplift the industry is deriving benefit from, S. Culture International Holdings has not been able to gain as much as its average peer.
What does this mean?
Though S. Culture International Holdings’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to envisage what will happen in the future and when. The most insightful step is to assess company-specific issues S. Culture International Holdings may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research S. Culture International Holdings to get a better picture of the stock by looking at: