When UOB-Kay Hian Holdings Limited (SGX:U10) released its most recent earnings update (30 September 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were UOB-Kay Hian Holdings’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not U10 actually performed well. Below is a quick commentary on how I see U10 has performed. See our latest analysis for UOB-Kay Hian Holdings
Did U10 beat its long-term earnings growth trend and its industry?
For the most up-to-date info, I use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method allows me to analyze different stocks on a more comparable basis, using the most relevant data points. UOB-Kay Hian Holdings’s latest twelve-month earnings is SGD66.2M, which, relative to the prior year’s level, has moved up by 20.52%. Given that these values may be fairly short-term thinking, I have estimated an annualized five-year figure for U10’s net income, which stands at SGD81.8M. This shows that, despite the fact that earnings growth from last year was positive, over the past couple of years, UOB-Kay Hian Holdings’s earnings have been deteriorating on average.
Why is this? Let’s examine what’s going on with margins and if the entire industry is experiencing the hit as well. Although revenue growth over the past couple of years, has been negative, earnings growth has been deteriorating by even more, implying that UOB-Kay Hian Holdings has been ramping up its expenses. This harms margins and earnings, and is not a sustainable practice. Eyeballing growth from a sector-level, the SG capital markets industry has been growing, albeit, at a subdued single-digit rate of 3.25% in the past year, and a flatter -1.22% over the previous few years. This means whatever recent headwind the industry is enduring, UOB-Kay Hian Holdings is relatively better-cushioned than its peers.
What does this mean?
UOB-Kay Hian Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook.
You should continue to research UOB-Kay Hian Holdings to get a more holistic view of the stock by looking at:
1. Financial Health: Is U10’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.