Today I will take a look at Keck Seng Investments (Hong Kong) Limited’s (SEHK:184) most recent earnings update (30 June 2017) and compare these latest figures against its performance over the past few years, as well as how the rest of the hospitality industry performed. As an investor, I find it beneficial to assess 184’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. See our latest analysis for Keck Seng Investments (Hong Kong)
Did 184 perform worse than its track record and industry?
For the purpose of this commentary, I like to use 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 allows me to assess various companies on a similar basis, using the latest information. “For Keck Seng Investments (Hong Kong), its “, most recent earnings is HK$168.1M, which, relative to the previous year’s figure, has fallen by -6.92%. Since these figures may be somewhat short-term thinking, I have computed an annualized five-year figure for Keck Seng Investments (Hong Kong)’s net income, which stands at HK$256.5M. This doesn’t look much better, as earnings seem to have steadily been declining over time.
Why is this? Let’s examine what’s going on with margins and if the entire industry is facing the same headwind. Revenue growth over the past couple of years, has been positive, nevertheless earnings growth has been deteriorating. This suggest that Keck Seng Investments (Hong Kong) has been ramping up expenses, which is harming margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the HK hospitality industry has been enduring some headwinds over the last couple of years, leading to an average earnings drop of -8.14% in the most recent year. This means whatever recent headwind the industry is enduring, the impact on Keck Seng Investments (Hong Kong) has been softer relative to its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Generally companies that endure an extended period of diminishing earnings are undergoing some sort of reinvestment phase . However, if the entire industry is struggling to grow over time, it may be a sign of a structural shift, which makes Keck Seng Investments (Hong Kong) and its peers a riskier investment. I suggest you continue to research Keck Seng Investments (Hong Kong) to get a better picture of the stock by looking at: