When CK Infrastructure Holdings Limited (SEHK:1038) released its most recent earnings update (30 June 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were CK Infrastructure 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 1038 actually performed well. Below is a quick commentary on how I see 1038 has performed. See our latest analysis for CK Infrastructure Holdings
Was 1038’s recent earnings decline indicative of a tough track record?
I prefer to use the ‘latest twelve-month’ data, 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 technique allows me to assess many different companies in a uniform manner using new information. “For CK Infrastructure Holdings, its “, latest twelve-month earnings is HK$9,782.0M, which, in comparison to the previous year’s figure, has dropped by -14.34%. Given that these figures may be somewhat short-term, I have created an annualized five-year value for CK Infrastructure Holdings’s net income, which stands at HK$12,797.3M. This doesn’t seem to paint a better picture, since earnings seem to have steadily been falling over the longer term.
What could be happening here? Well, let’s look at what’s going on with margins and if the whole industry is feeling the heat. Over the last couple of years, revenue growth has fallen behind which suggests that CK Infrastructure Holdings’s bottom line has been propelled by unmaintainable cost-reductions. Scanning growth from a sector-level, the HK electric utilities industry has been enduring some headwinds in the past year, leading to an average earnings drop of -13.48%. This is a major change, given that the industry has been delivering a positive rate of 5.95%, on average, over the past couple of years. This shows that whatever recent headwind the industry is experiencing, it’s hitting CK Infrastructure Holdings harder than its peers.
What does this mean?
CK Infrastructure Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. In some cases, companies that experience a prolonged period of reduction in earnings are undergoing some sort of reinvestment phase . Though if the whole industry is struggling to grow over time, it may be a sign of a structural change, which makes CK Infrastructure Holdings and its peers a riskier investment. I recommend you continue to research CK Infrastructure Holdings to get a more holistic view of the stock by looking at: