After looking at Hotel Grand Central Limited’s (SGX:H18) latest earnings announcement (30 September 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 tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. View our latest analysis for Hotel Grand Central
Commentary On H18’s Past Performance
I look at 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 assess various companies in a uniform manner using new information. For Hotel Grand Central, the latest twelve-month earnings is SGD37.2M, which, in comparison to the prior year’s figure, has fallen by -16.20%. Since these figures may be fairly nearsighted, I have created an annualized five-year value for H18’s earnings, which stands at SGD34.3M. This shows that although earnings declined against the previous year, over the longer term, Hotel Grand Central’s earnings have been increasing on average.
How has it been able to do this? Let’s take a look at whether it is solely owing to industry tailwinds, or if Hotel Grand Central has experienced some company-specific growth. In the last few years, Hotel Grand Central grew bottom-line, while its top-line declined, by effectively controlling its costs. This has led to to a margin expansion and profitability over time. Looking at growth from a sector-level, the SG hospitality industry has been growing, albeit, at a muted single-digit rate of 9.90% over the prior twelve months, . This is a change from a volatile drop of -4.63% in the last couple of years. This means in the recent industry expansion, Hotel Grand Central has not been able to realize the gains unlike its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies are profitable, but have capricious earnings, can have many factors impacting its business. You should continue to research Hotel Grand Central to get a more holistic view of the stock by looking at:
1. Financial Health: Is H18’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.