Yahoo News Has China City Infrastructure Group Limited (HKG:2349) Improved Earnings In Recent Times?
In this article, I will take a look at China City Infrastructure Group Limited's (SEHK:2349) most recent earnings update (31 December 2019) and compare these latest figures against its performance over the past few years, along with how the rest of 2349's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
Check out our latest analysis for China City Infrastructure Group
Did 2349's recent earnings growth beat the long-term trend and the industry?
2349 is loss-making, with the most recent trailing twelve-month earnings of -HK$174.6m (from 31 December 2019), which compared to last year has become less negative. Furthermore, the company's loss seem to be growing over time, with the five-year earnings average of -HK$141.8m. Each year, for the past five years 2349 has seen an annual decline in revenue of -4.6%, on average. This adverse movement is a driver of the company's inability to reach breakeven.
Eyeballing growth from a sector-level, the HK real estate industry has been growing, albeit, at a subdued single-digit rate of 2.8% over the previous year, and a substantial 16% over the previous five years. This growth is a median of profitable companies of 25 Real Estate companies in HK including Emperor International Holdings, Star Properties Group (Cayman Islands) and Overseas Chinese Town (Asia) Holdings. This shows that whatever recent headwind the industry is enduring, it’s hitting China City Infrastructure Group harder than its peers.
Given that China City Infrastructure Group is not profitable, even if operating expenses (SG&A and one-year R&D) continues to fall at previous year’s rate of -5.5%, the company’s current cash level (HK$21m) will still be insufficient to cover its expenses in the upcoming year. This is not a great sign in terms of operations and cash management. Although this is a relatively simplistic calculation, and China City Infrastructure Group may continue to reduce its costs further or open a new line of credit instead of issuing new equity shares, 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?
China City Infrastructure Group's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that incur net loss is always difficult to forecast what will happen in the future and when. The most valuable step is to assess company-specific issues China City Infrastructure Group may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research China City Infrastructure Group to get a better picture of the stock by looking at:
Financial Health: Are 2349’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.
Valuation: What is 2349 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 2349 is currently mispriced by the market.
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 31 December 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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