Last update on 2024-06-05

Power Assets Holdings (HEH.F) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Power Assets Holdings (HEH.F) 2023 Piotroski F-Score analysis: Final Score 6/9. Detailed review of financial metrics including profitability, liquidity, and efficiency.

Short Analysis - Piotroski Score: 6

We're running Power Assets Holdings (HEH.F) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score for Power Assets Holdings (HEH.F) is 6 out of 9. This score suggests a relatively strong financial position compared to companies with lower scores. Here's a brief breakdown of the evaluation: **Profitability:** 1. Positive Net Income (1 Point): In 2023, HKD 6,003,000,000. 2. Positive Cash Flow from Operations (1 Point): In 2023, HKD 1,138,000,000. 3. Increase in Return on Assets (1 Point): ROA increased from 0.0598 to 0.0631. 4. Operating Cash Flow lower than Net Income (0 Point). **Liquidity:** 5. Decreasing Leverage (1 Point): Decreased slightly from 0.0342 to 0.0324 in 2023. 6. Current Ratio is not growing (0 Point): Decreased from 1.7038 to 1.3416 in 2023. 7. No Share Dilution (1 Point): Outstanding shares decreased significantly. **Operating Efficiency:** 8. Decrease in Gross Margin (0 Point): Gross Margin dropped from 1.0158 to 0. 9. Marginal Increase in Asset Turnover (1 Point): Slight increase from 0.0134 to 0.0136.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score, Power Assets Holdings (HEH.F) appears to have a solid overall financial position with a score of 6 out of 9. However, areas of concern include the drop in Gross Margin and the operating cash flow being lower than net income, which could indicate potential issues in earnings quality and operational efficiency. Investors who prioritize companies with good profitability, consistent cash generation, and lower leverage might find this stock attractive. However, further analysis is recommended to address the areas of concern before making any investment decisions.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Power Assets Holdings (HEH.F)

Company has a positive net income?

Net income is the profit of a company after all expenses have been deducted from total revenue, and is a key indicator of financial health.

In 2023, Power Assets Holdings (HEH.F) reported a net income of HKD 6,003,000,000. This net income is positive, adding 1 point to the Piotroski Score for the company. Over the past 20 years, Power Assets Holdings has consistently posted positive net incomes, except for fluctuations. In 2003, the net income was HKD 762,952,000, and reached as high as HKD 61,085,000,000 in 2014. The trend showcases the entity’s persistent profitability, albeit with some yearly variances, which reflects resilience and the capability to generate profits consistently.

Company has a positive cash flow?

Cash flow from operations (CFO) indicates the amount of cash generated by a company's normal business operations. A positive CFO is considered good as it shows the company can generate sufficient cash to maintain and grow its operations.

For the year 2023, the CFO for Power Assets Holdings (HEH.F) is 1,138,000,000, which is positive. Therefore, according to the Piotroski F-Score, this criterion earns a point. Over the last 20 years, the company's CFO has generally remained positive except for some fluctuations. This consistency reaffirms the company's robust operational cash-generating capability. The trend is favorable and suggests financial stability for Power Assets Holdings.

Return on Assets (ROA) are growing?

This criterion aims to determine whether the Return on Assets (ROA) has improved from one fiscal year to the next. An increase in ROA indicates that the company is becoming more efficient in generating profit from its assets.

In 2022, Power Assets Holdings had an ROA of 0.0598, while in 2023, it increased to 0.0631. This signifies that the company's efficiency in generating profit from its assets has improved year-over-year. A higher ROA is generally positive as it suggests better utilization of assets in generating profits. When comparing this to the last 20 years, despite the increase, Power Assets Holdings' ROA is substantially below the historical industry median, which peaks significantly higher. Therefore, while the recent trend is good (adding 1 point in Piotroski criteria), the long-term ROA indicates room for further efficiency gains when benchmarked against industry standards.

Operating Cashflow are higher than Netincome?

This criterion compares the company's Operational Cash Flow with its Net Income. A higher Operating Cash Flow indicates better quality earnings and suggests the company's revenues are being efficiently converted to cash, a key sign of financial strength.

For Power Assets Holdings, the Operating Cash Flow for 2023 stands at $1,138,000,000, while the Net Income is $6,003,000,000. Clearly, the Operating Cash Flow is significantly lower than the Net Income. This scenario draws attention to the quality of earnings reported. When Operating Cash Flow is lower than Net Income, it could suggest potential issues such as revenue recognition practices, higher levels of non-cash earnings components, or inefficient cash management. For instance, in previous years, Operating Cash Flow metrics were generally comparable to Net Income but seldom outpaced it as starkly as in 2023. Overall, this trend does not earn a point in the Piotroski Score, placing it at 0 for this particular criterion as it raises flags about the quality of reported earnings and operational cash flow dynamics.

Liquidity of Power Assets Holdings (HEH.F)

Leverage is declining?

Change in Leverage refers to the ratio of a company's total debt to its equity and indicates the extent to which a firm is using borrowed money. It is crucial because a lower leverage ratio generally suggests a more stable and less risky financial structure.

In 2022, Power Assets Holdings had a leverage ratio of 0.0342. By 2023, this ratio decreased slightly to 0.0324. Hence, the leverage has decreased in 2023. Following the Piotroski F-Score criteria, this would result in an addition of 1 point to the score. Looking at the data for the last 20 years, the company has maintained relatively low leverage ratios, with fluctuations but a general trend towards stability. This decreasing leverage in 2023 is a positive sign and reflects prudent financial management. It reduces the risk associated with high debt levels and indicates that the company is managing its obligations well.

Current Ratio is growing?

The Current Ratio criterion compares a company's current assets to its current liabilities. It measures liquidity and the company's ability to pay short-term obligations, indicating financial health.

In 2023, Power Assets Holdings (HEH.F) posted a Current Ratio of 1.3416, down from 1.7038 in 2022. This decline signals a reduction in liquidity compared to the previous year. For context, the industry median Current Ratio for 2023 stood at 1.0239, indicating that despite the decrease, Power Assets Holdings is still in a relatively better liquidity position compared to its industry peers. Over the last 20 years, the company's Current Ratio has shown significant fluctuations, peaking at an extraordinary 32.3469 in 2015 and dropping to a low of 0.8074 in 2010, showcasing varied liquidity trends. Nonetheless, the downward trend from 2022 to 2023 results in a Piotroski point addition of 0 for this criterion.

Number of shares not diluted?

Change in Outstanding Shares is important to consider because it reflects share dilution or consolidation, influencing shareholder's value and ownership percentage.

In 2022, the Outstanding Shares for Power Assets Holdings (HEH.F) were 2,133,515,443. However, in 2023, the Outstanding Shares are recorded as 0. This significant decrease implies that the company may have undertaken a significant share buyback or consolidation. Given the trend of fluctuations in Outstanding Shares over the past 20 years, this latest move considerably reduces the total shares in circulation. Thus, this criterion would receive 1 point, indicating a positive trend for existing shareholders, as it reduces dilution and could potentially increase the per-share value of the company.

Operating of Power Assets Holdings (HEH.F)

Cross Margin is growing?

The Change in Gross Margin criterion examines whether a company's ability to turn revenue into profit has improved year over year. An increase in Gross Margin would indicate enhanced efficiency and cost control.

Power Assets Holdings reported a Gross Margin of 0 in 2023, down significantly from its Gross Margin of 1.0158 in 2022. This clearly marks a sharp decrease. When comparing these values across the timeline, the Gross Margin has shown significant volatility but has recently dropped below both its historical performance and the industry median, which stands at 0.194 for 2023. This downward trend suggests deteriorating profitability and operational inefficiencies. Therefore, no point is awarded for this criterion as the Gross Margin has decreased in 2023.

Asset Turnover Ratio is growing?

Asset turnover measures how efficiently a company uses its assets to generate sales; calculated as sales divided by average total assets. High ratios indicate efficient use of assets.

The Asset Turnover for Power Assets Holdings (HEH.F) saw a slight increase from 0.0134 in 2022 to 0.0136 in 2023. Despite being marginal, this upward trend suggests a modest improvement in operational efficiency. Over a 20-year period, asset turnover has drastically declined from 0.1989 in 2003 to current levels, indicating a long-term inefficiency. However, the increase in 2023 earns the company 1 point for this criterion. This is a positive, albeit minor, step in the right direction.