When Keong Hong Holdings Limited (SGX:5TT) announced its most recent earnings (30 September 2017), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Keong Hong Holdings performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see 5TT has performed. View our latest analysis for Keong Hong Holdings
Were 5TT’s earnings stronger than its past performances and the industry?
I use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method allows me to analyze various companies in a uniform manner using the most relevant data points. Keong Hong Holdings’s most recent earnings is SGD64.0M, which, in comparison to last year’s figure, has jumped by a significant 84.75%. Since these figures are fairly short-term thinking, I’ve determined an annualized five-year value for 5TT’s net income, which stands at SGD25.3M. This suggests that, on average, Keong Hong Holdings has been able to increasingly grow its net income over the past few years as well.
What’s the driver of this growth? Let’s take a look at whether it is merely due to industry tailwinds, or if Keong Hong Holdings has experienced some company-specific growth. Over the last couple of years, Keong Hong Holdings expanded its bottom line faster than revenue by effectively controlling its costs. This resulted in a margin expansion and profitability over time. Eyeballing growth from a sector-level, the SG construction industry has been enduring some headwinds over the past few years, leading to an average earnings drop of -8.11% in the most recent year. This means any near-term headwind the industry is experiencing, the impact on Keong Hong Holdings has been softer relative to its peers.
What does this mean?
Keong Hong Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Keong Hong Holdings to get a more holistic view of the stock by looking at:
1. Financial Health: Is 5TT’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.