In this commentary, I will examine K H Group Holdings Limited’s (SEHK:1557) latest earnings update (30 September 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the construction and engineering industry performed. As an investor, I find it beneficial to assess 1557’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 K. H. Group Holdings
Was 1557 weak performance lately part of a long-term decline?
I look at 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 method enables me to examine many different companies on a more comparable basis, using new information. For K. H. Group Holdings, its most recent trailing-twelve-month earnings is -HK$23.4M, which compared to the previous year’s figure, has become more negative. Since these figures may be fairly nearsighted, I’ve determined an annualized five-year figure for K. H. Group Holdings’s net income, which stands at HK$14.0M.
We can further assess K. H. Group Holdings’s loss by researching what has been happening in the industry as well as within the company. Firstly, I want to quickly look into the line items. Revenue growth over the last few years has been negative at -5.98%. The key to profitability here is to make sure the company’s cost growth is well-managed. Eyeballing growth from a sector-level, the HK construction and engineering industry has been enduring some headwinds over the previous twelve months, leading to average earnings dropping by more than half. This is a a notable change, given that the industry has been delivering a relatively flat growth rate over the past few years. This means any recent headwind the industry is enduring, it’s hitting K. H. Group Holdings harder than its peers.
What does this mean?
K. H. Group Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to predict what will happen in the future and when. The most useful step is to examine company-specific issues K. H. Group Holdings may be facing and whether management guidance has regularly been met in the past. You should continue to research K. H. Group Holdings to get a better picture of the stock by looking at: