Today I will take a look at Grand Peace Group Holdings Limited's (SEHK:8108) most recent earnings update (30 June 2019) and compare these latest figures against its performance over the past few years, as well as how the rest of the consumer services industry performed. As an investor, I find it beneficial to assess 8108’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
View our latest analysis for Grand Peace Group Holdings
How Well Did 8108 Perform?
8108 is loss-making, with the most recent trailing twelve-month earnings of -HK$65.6m (from 30 June 2019), which compared to last year has become more negative. Furthermore, the company's loss seem to be growing over time, with the five-year earnings average of -HK$52.1m. Each year, for the past five years 8108 has seen an annual increase in operating expense growth, outpacing revenue growth of 6.3%, on average. This adverse movement is a driver of the company's inability to reach breakeven.
Scanning growth from a sector-level, the HK consumer services industry has been growing its average earnings by double-digit 14% in the prior twelve months, and 21% over the past half a decade. This growth is a median of profitable companies of 25 Consumer Services companies in HK including Tokyo Chuo Auction Holdings, Qeeka Home (Cayman) and Steve Leung Design Group. This suggests that any uplift the industry is benefiting from, Grand Peace Group Holdings has not been able to gain as much as its average peer.
Since Grand Peace Group Holdings is currently unprofitable, with operating expenses (opex) growing year-on-year at 3.0%, it may need to raise more cash over the next year. It currently has HK$1.1m in cash and short-term investments, however, opex (SG&A and one-year R&D) reachedHK$40m in the latest twelve months. Even though this is analysis is fairly basic, and Grand Peace Group Holdings still can cut its overhead in the near future, or raise debt capital instead of coming to equity markets, the outcome of this analysis still gives us an idea of the company’s timeline and when things will have to start changing, since its current operation is unsustainable.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always hard to predict what will occur going forward, and when. The most insightful step is to examine company-specific issues Grand Peace Group Holdings may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Grand Peace Group Holdings to get a better picture of the stock by looking at: