Investors with a long-term horizong may find it valuable to assess Keong Hong Holdings Limited’s (SGX:5TT) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Keong Hong Holdings is currently performing.
View our latest analysis for Keong Hong Holdings
How Well Did 5TT Perform?
5TT’s trailing twelve-month earnings (from 30 June 2018) of S$68.7m has more than doubled from S$34.7m in the prior year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 22.9%, indicating the rate at which 5TT is growing has accelerated. What’s enabled this growth? Well, let’s take a look at whether it is solely due to industry tailwinds, or if Keong Hong Holdings has seen some company-specific growth.
In the past couple of years, Keong Hong Holdings expanded its bottom line faster than revenue by efficiently controlling its costs. This resulted in a margin expansion and profitability over time.
Viewing growth from a sector-level, the SG construction industry has been relatively flat in terms of earnings growth . Thought this is a bit of a turnaround from a volatile drop of -2.6% in the last few years. This growth is a median of profitable companies of 21 Construction companies in SG including Swee Hong, OKP Holdings and Mun Siong Engineering. This suggests that any recent headwind the industry is experiencing, Keong Hong Holdings is less exposed compared to its peers.
In terms of returns from investment, Keong Hong Holdings has invested its equity funds well leading to a 33.3% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 15.3% exceeds the SG Construction industry of 4.0%, indicating Keong Hong Holdings has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Keong Hong Holdings’s debt level, has declined over the past 3 years from 17.1% to 8.3%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 6.9% to 59.1% over the past 5 years.
What does this mean?
Though Keong Hong Holdings’s past data is helpful, it is only one aspect of my investment thesis. While Keong Hong Holdings has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Keong Hong Holdings to get a more holistic view of the stock by looking at: