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Today I will examine PC Partner Group Limited’s (HKG:1263) latest earnings update (30 June 2018) and compare these figures against its performance over the past couple of years, in addition to how the rest of 1263’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.
View our latest analysis for PC Partner Group
How 1263 fared against its long-term earnings performance and its industry
1263’s trailing twelve-month earnings (from 30 June 2018) of HK$628.6m has more than doubled from HK$150.2m in the prior year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 36.6%, indicating the rate at which 1263 is growing has accelerated. What’s enabled this growth? Let’s see if it is only attributable to industry tailwinds, or if PC Partner Group has experienced some company-specific growth.
Over the past few years, PC Partner Group grew its bottom line faster than revenue by effectively controlling its costs. This has caused a margin expansion and profitability over time. Looking at growth from a sector-level, the HK tech industry has been relatively flat in terms of earnings growth over the past few years. This growth is a median of profitable companies of 5 Tech companies in HK including EVOC Intelligent Technology, China Display Optoelectronics Technology Holdings and Goldpac Group. This shows that whatever near-term headwind the industry is facing, PC Partner Group is less exposed compared to its peers.
In terms of returns from investment, PC Partner Group has invested its equity funds well leading to a 44.2% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 13.1% exceeds the HK Tech industry of 3.1%, indicating PC Partner Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for PC Partner Group’s debt level, has increased over the past 3 years from 2.2% to 49.5%.
What does this mean?
PC Partner Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that have performed well in the past, such as PC Partner Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research PC Partner Group to get a better picture of the stock by looking at: