Has CITIC Telecom International Holdings Limited (HKG:1883) Improved Earnings Growth In Recent Times?
After reading CITIC Telecom International Holdings Limited’s (HKG:1883) most recent earnings announcement (30 June 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether CITIC Telecom International Holdings’s performance has been impacted by industry movements. In this article I briefly touch on my key findings.
View our latest analysis for CITIC Telecom International Holdings
How Well Did 1883 Perform?
1883’s trailing twelve-month earnings (from 30 June 2018) of HK$915.4m has increased by 2.3% compared to the previous year. However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 7.5%, indicating the rate at which 1883 is growing has slowed down. What could be happening here? Well, let’s look at what’s occurring with margins and if the rest of the industry is experiencing the hit as well.
Revenue growth in the past couple of years, has been positive, however, earnings growth has failed to keep up meaning CITIC Telecom International Holdings has been increasing its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the HK telecom industry has been growing, albeit, at a muted single-digit rate of 8.4% in the prior year, and 5.7% over the past five years. This growth is a median of profitable companies of 9 Telecom companies in HK including PCCW, HKT Trust and HKT and China Telecom. This means that any tailwind the industry is profiting from, CITIC Telecom International Holdings has not been able to leverage it as much as its average peer.
In terms of returns from investment, CITIC Telecom International Holdings has fallen short of achieving a 20% return on equity (ROE), recording 11.0% instead. However, its return on assets (ROA) of 6.5% exceeds the HK Telecom industry of 5.0%, indicating CITIC Telecom International Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for CITIC Telecom International Holdings’s debt level, has increased over the past 3 years from 6.4% to 6.5%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 143% to 87.9% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While CITIC Telecom International Holdings has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research CITIC Telecom International Holdings to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 1883’s future growth? Take a look at our free research report of analyst consensus for 1883’s outlook.
Financial Health: Are 1883’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.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
