Result first take: FY21 results below expectations; comment on going concerns raised under a clean opinion
- FY21 results came in below expectation, with shortfall stemmed mainly from expenses on inventory writedown, higher than expected LAT and a larger than expected surge in minority interests. Attributable core earnings fell 33% y-o-y
- Final DPS was declared at HK$7.87cents, down 90% y-o-y alongside a 25ppt cut on dividend payout ratio to 5% on reported core earnings, in-line with expectations
- Balance sheet under moderate pressure with total cash fell 23% y-o-y and restricted as % of total cash rose 11ppt to c.29%. Cash to ST debt ratio (ex-restricted cash) fell to 1.2x as at Dec-21
- While a clean opinion on its accounting statement, independent auditor (E&Y) has commented on a material uncertainty on the Times China’s going concern.
- More to follow after the company’s result briefing at 10:00am on 31 Mar (Thurs)
- Our rating and TP on the counter are under review
What’s new?
Times China (1233 HK) released a set of below-expected FY21 results after market close yesterday
Our view
FY21 results below, with shortfall derived mainly from expenses on inventory writedown, higher than expected LAT and much larger than expected surge in minority interests
- Revenue rose 13% y-o-y in FY21, in-line with expectations
- Gross margin declined 1ppt to 27.6%, which came in slightly above expectations
- An inventory write-down of Rmb598m was recognized in FY21 (vs Rmb87m in FY20)
- SG&A as % of presales improved 0.5ppt y-o-y, in-line with expectation
- Effective tax rate picked up 2ppt to 43%. Within which, LAT unexpectedly surged 49% and came in higher than expected.
- Minority interests unexpected picked up 250%.
- Core net margin accordingly fell 5ppt y-o-y to 7.0% and translated into a 33% y-o-y decline in attributable core earnings, below expectations
- Investment property revaluation recorded a loss of Rmb202mn
- Final DPS was declared at HK7.87cents, down 90% y-o-y alongside a 25ppt cut in dividend payout ratio to 5% on reported core earnings
Pressure remains on balance sheet
- Total cash witness a 23% decline from Jun-21 as at Dec-21. Restricted cash as % of total cash rose 11ppt from Jun-21 to c.29%. Cash to ST debt dropped from 2.3x as at Jun-21 to 1.7x (or from 1.9x to 1.2x ex-restricted cash)
- Total interest bearing debt fell 3% from Jun-21. ST debt as a % of total debt rose slightly to 21.8% as at Dec-21
- Net gearing ratio surged 8ppt from Jun-21 upon a surge in net debt 16% surge in net debt alongside a mere 4% increase in total equity
- The company remains in the “Yellow Category” under the “Three Red Lines” policy as at Dec-21, with Cash to short term debt deteriorated to 1.7x (vs Jun-21’s 2.3x), Adjusted asset to liability ratio of 76.6% (vs 78.6% as at Dec-20) and a gearing ratio of 69% (vs 66% as at Dec-20)
- While a clean opinion on its accounting statements, independent auditor has expectedly rised comments on material uncertainty relating the company’s going concern.
More to follow after the company’s online result briefing to be held at 10:00am on 31 Mar (Thurs)
Key things to watch for:
- Expected presales in 2022 and operational scale going forward
- Strategic focus on redevelopment project – will the company decide to adjust its strategy given rising doubts and concerns casted over redevelopment projects?
- Off-balance sheet debt status and overall repayment plans – any asset disposal plans? Timeline and expected size?
- Latest status over cash collection
- Delivery outlook for 2022 and 2023 – will the company need to pause its construction pace and delay delivery in 2022 and 2023?
- Profit margin outlook – how much discounts did the company offer in 2021? What is the average GPM of unbooked sales held as at Dec-21?
- Land acquisition strategy in 2022 – will the company remain on the sideline in terms of landbanking as most refinancing windows remain shut?
- Dividend policy, amongst others
