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For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Y T Realty Group Limited (HKG:75) useful as an attempt to give more color around how Y. T. Realty Group is currently performing.
View our latest analysis for Y. T. Realty Group
How Well Did 75 Perform?
75’s trailing twelve-month earnings (from 30 June 2018) of HK$57.0m has more than halved from HK$356.1m in the prior year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -12.6%, indicating the rate at which 75 is growing has slowed down. What could be happening here? Well, let’s take a look at what’s going on with margins and if the entire industry is feeling the heat.
Although revenue growth in the past few years, has been negative, earnings growth has been declining by even more, suggesting that Y. T. Realty Group has been ramping up its expenses. This harms margins and earnings, and is not a sustainable practice.
Inspecting growth from a sector-level, the HK real estate industry has been growing its average earnings by double-digit 48.1% in the prior twelve months, and a less exciting 7.6% over the past five. This growth is a median of profitable companies of 24 Real Estate companies in HK including Sino Harbour Holdings Group, Tian An China Investments and Chuang’s China Investments. This means that any uplift the industry is benefiting from, Y. T. Realty Group has not been able to leverage it as much as its industry peers.
In terms of returns from investment, Y. T. Realty Group has fallen short of achieving a 20% return on equity (ROE), recording 3.5% instead. Furthermore, its return on assets (ROA) of 3.4% is below the HK Real Estate industry of 3.7%, indicating Y. T. Realty Group’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Y. T. Realty Group’s debt level, has declined over the past 3 years from 5.8% to 2.5%.
What does this mean?
Y. T. Realty Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Usually companies that face an extended period of diminishing earnings are going through some sort of reinvestment phase in order to keep up with the latest industry disruption and growth. I recommend you continue to research Y. T. Realty Group to get a more holistic view of the stock by looking at: