Earnings First Take: Raising FY22 GMV and EBITDA targets
- Revenue increased by 8.8% y-o-y to HK$3,130 million in FY21
- Net profit decreased by 92% to HK$14.3m, below market expectations, due to slower revenue and higher opex in 2H21
- Despite weaker FY21 performance, GMV in the first few months of 2022 benefits from increasing online shopping demand amid fifth wave of Covid
- Raised FY22 GMV and adjusted EBITDA targets after registering record high monthly in 1Q22
What’s New
– HKTV (1137 HK, BUY) announced its FY21 results today after market close.
– Revenue increased by 8.8% y-o-y to HK$3,130 million, below market expectations of c.13% growth.
– Net profit decreased by 92% to HK$14.3m, below market expectations, mainly due to slower revenue growth and higher opex expenses. in 2H21
– Adjusted EBITDA contracted to HK$112.7m in FY21 vs. HK$236.2 million in FY20.
– In terms of operating metrix, GMV grew by 10.4% to HK$6,574m; average daily orders increased to 39k in FY21, up from 32.3k in FY20; average order value decreased by 8% to HK$462.
– Gross profit as % of GMV was 23.7% in FY21, slightly down from 24.6% in FY20. The lower margin was mainly due to intensified competition for online groceries and lower 3P commission rate for electronic products .
– Fulfilment cost as a percentage of GMV remained stable at 11.7% in FY21 (vs 11.8% in FY20).
– No final dividend was declared for FY21.
– Note that the company gave 2022 GMV guidance of HK$7.5-8bn and adjusted EBITDA of c.HK$50bn in business update announced in Jan 22. Now it raised all the targets as follows: (1) GMV of HK$8-8.5bn, representing 21.7-29.4% y-o-y growth (2) adjusted EBITDA as a % of GMV at 2.0-2.5% (vs 2021: 2.3%), represent a y-o-y growth of 42%-89% to c.HK$160-213m. Adjusted EBITDA target is above market expectations. The guidance for multimedia advertising income remained unchanged at c.HK$120m.
-To support mid-long term growth, HKTV launched a 5-year CAPEX plan to expand automated fulfillment capacity from existing 570k sq.ft. to 900k+ sq.ft., with total costs of around HK$860m.
Our View:
– We expect share price to react positively to upward revision in guidance.
– We believe the new FY22 targets should be achievable, supported by strong online shopping demand under fifth wave of Covid and its enhanced fulfillment capability.
– As for automated retail store business, management targets to have the first deployment on pilot run basis in Manchester in 2H22. This represents longer term growth potential.
– We currently rate BUY with TP of HK$10.