After looking at Dream International Limited’s (SEHK:1126) latest earnings announcement (30 June 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Dream International’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. View our latest analysis for Dream International
How 1126 fared against its long-term earnings performance and its industry
For the most up-to-date info, I use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This technique enables me to examine different stocks in a uniform manner using new information. “For Dream International, its “, latest twelve-month earnings is HK$335.5M, which, relative to the previous year’s level, has jumped by a substantial 77.66%. Given that these values are somewhat nearsighted, I have created an annualized five-year figure for 1126’s net income, which stands at HK$156.5M. This means that, on average, Dream International has been able to increasingly grow its net income over the last couple of years as well.
What’s enabled this growth? Well, let’s take a look at if it is merely due to industry tailwinds, or if Dream International has seen some company-specific growth. In the past few years, Dream International expanded its bottom line faster than revenue by successfully controlling its costs. This resulted in a margin expansion and profitability over time. Scanning growth from a sector-level, the HK leisure products industry has been growing its average earnings by double-digit 25.02% in the previous year, and a flatter -1.55% over the past five years. This shows that, in the recent industry expansion, Dream International is capable of leveraging this to its advantage.
What does this mean?
Though Dream International’s past data is helpful, it is only one aspect of my investment thesis. While Dream International has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Dream International to get a more holistic view of the stock by looking at: