Last update on 2024-06-05

Sun Hung Kai Properties (SHG.F) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Sun Hung Kai Properties (SHG.F) scored 5/9 in the 2023 Piotroski F-Score analysis, indicating moderate financial health. Discover its profitability, liquidity, and efficiency trends.

Short Analysis - Piotroski Score: 5

We're running Sun Hung Kai Properties (SHG.F) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Sun Hung Kai Properties (SHG.F) has been analyzed using the Piotroski F-Score, which considers profitability, liquidity, and operating efficiency. The company scored a 5 out of 9, indicating a mixed but overall stable financial position. Highlights include positive net income and operating cash flow for 2023, robust current ratio signaling strong liquidity, but challenges in efficiency as shown by declining ROA and asset turnover ratios. Gross margin and leverage also indicated potential concerns.

Insights for Value Investors Seeking Stable Income

Given the Piotroski F-Score of 5 out of 9 for Sun Hung Kai Properties (SHG.F), this stock shows both strength and weakness. Investors might find value in its strong liquidity and profitability, but should be wary of its decreasing efficiency and rising leverage. It's a decent candidate for further scrutiny, especially considering its historical ability to maintain profitability even during economic downturns. Potential investors should closely monitor the company's operational efficiency and debt levels 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 Sun Hung Kai Properties (SHG.F)

Company has a positive net income?

The net income criterion checks if the company had a positive net income, signifying profitability.

For the fiscal year 2023, Sun Hung Kai Properties (SHG.F) reported a net income of HKD 23,907,000,000, which is significantly positive. Over the last two decades, the net income performance has been mostly robust, with only a few dips. Particularly, the company maintained a substantial net income even during challenging economic periods, such as the 2008 financial crisis and the COVID-19 pandemic in 2020. Given this historical performance, the positive net income for 2023 accords it 1 point in the Piotroski analysis, underscoring its continued profitability.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash generated by a company's normal business operations. High positive values indicate a company's ability to generate sufficient cash to maintain and grow its operations.

In 2023, Sun Hung Kai Properties reported a Cash Flow from Operations (CFO) of 26.177 billion HKD. This flux in operating cash flow is indeed positive, thereby earning the company a point under the Piotroski F-Score criterion. Observing the historical data, we can see that the firm's CFO has experienced various fluctuations over the last two decades. The operating cash flow has swung significantly from a high of 46.5 billion HKD in 2020 to a negative value as recently as 2014. These pronounced variations stress the volatile nature of operational cash flow for Sun Hung Kai Properties. Nevertheless, the most recent data is positive and thus reflects a favorable short-term liquidity scenario for the company.

Return on Assets (ROA) are growing?

Change in ROA measures the return on assets over time to determine if a company is becoming more efficient in utilizing its assets to generate profits.

For Sun Hung Kai Properties (SHG.F), the ROA has decreased from 0.0319 in 2022 to 0.0296 in 2023. This represents a decline in asset utilization efficiency, which could be regarded as a negative trend. In contrast to the company’s performance, the broader industry's median ROA is at 0.4074 for 2023. This substantial difference suggests that Sun Hung Kai Properties is underperforming when measured against its industry peers. Because the ROA did not increase in 2023 compared to the previous year, we set the score for this criterion to 0.

Operating Cashflow are higher than Netincome?

Compare the Operating Cash Flow 26177000000 with the Net Income 23907000000 in 2023 and see which one is higher.

In 2023, the operating cash flow for Sun Hung Kai Properties stands at HKD 26,177,000,000, while the net income is HKD 23,907,000,000. As operating cash flow exceeds net income (by HKD 2,270,000,000), this is a positive indicator, therefore adding 1 point in the Piotroski score. This suggests that the company is generating sufficient cash from operations to cover its net income, reflecting a robust cash flow situation. Over the last 20 years, the cash flow from operations has shown variability, including occasional negative figures. However, the past few years have exhibited more positive cash flows compared to net income, thus offering insights into the company's operational efficiency. Accruals figures being low, with several years in negative or close to zero values, further leverage this cash flow strength by indicating lower earnings management. Therefore, this trend is beneficial under the Piotroski criterion of cash flow exceeding net income.

Liquidity of Sun Hung Kai Properties (SHG.F)

Leverage is declining?

The change in leverage criterion evaluates whether a company's leverage has increased or decreased year over year, reflecting its debt management.

Sun Hung Kai Properties (SHG.F) has experienced an increase in leverage from 0.1363 in 2022 to 0.1479 in 2023. This marks a 0.0116 uptick, signifying a 8.51% increase in leverage. An increasing leverage ratio can be concerning as it suggests a higher reliance on debt to fuel the company’s operations, increasing the risk in periods of financial instability. Reviewing the historical data, the leverage has stayed below 0.14 for the majority of the past two decades, only increasing notably in the last year, which is a deviation from the company’s historical trend.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay off its short-term liabilities with its short-term assets and is critical for assessing liquidity.

In 2023, Sun Hung Kai Properties (SHG.F) reported a Current Ratio of 4.5453, an increase from 4.0023 in 2022. This is a positive trend, suggesting improved liquidity. For perspective, a Current Ratio above 1 is generally good, and exceeding the industry median (3.3155 in 2023) further strengthens SHG's liquidity positioning. Over the past 20 years, SHG has consistently maintained a higher Current Ratio than the industry median, indicating strong performance in managing short-term liabilities. Increments in 2023 warrant a 1-point addition as per Piotroski criteria.

Number of shares not diluted?

Change in outstanding shares measures a company's trading habits and ownership dilution risk—it is important to monitor to understand how shareholder value is impacted.

For Sun Hung Kai Properties, the outstanding shares remained constant at 2,897,780,274 from 2022 to 2023. Over the past 20 years, shares have generally increased, starting from 2,402,919,708 in 2003 to 2,897,780,274 in recent years. This stability in the past two years is positive. However, for the Piotroski analysis according to the given criteria, since there is no decrease, we assign a score of 0.

Operating of Sun Hung Kai Properties (SHG.F)

Cross Margin is growing?

Change in Gross Margin: This criterion evaluates the latest gross margin relative to the previous year. It indicates the company's efficiency in managing its production costs relative to net sales, which is crucial for assessing profitability sustainability.

Comparing Sun Hung Kai Properties' gross margin of 0.484 in 2023 to 0.5124 in 2022, it becomes apparent that the gross margin has decreased. Therefore, no additional points are assigned as per the Piotroski analysis criteria. Over the past 20 years, the company's gross margin appears to have experienced volatility, peaking in certain years and dipping in others, but typically hovering above the industry median gross margin, current position excepted. Such a downward trend this particular year might signal potential challenges in cost management or pricing strategies, especially in light of the industry's marginal but still slightly lower 0.4074 gross margin for 2023.

Asset Turnover Ratio is growing?

An important measure of a company's operational efficiency, asset turnover reflects the company's ability to generate sales from its assets.

In comparing Sun Hung Kai Properties' Asset Turnover ratio of 0.0882 in 2023 with that of 0.0969 in 2022, there has been a decrease in the Asset Turnover. This is indicative of a lesser ability to generate revenue from its assets. Over the last 20 years, the Asset Turnover ratio has generally been volatile, fluctuating from as high as 0.1636 in 2011 to as low as 0.0876 in 2008. For 2023, it evidences a trend towards the lower end of this spectrum, often implying potential inefficiency or underutilization of assets. Consequently, this criterion would score a 0, as the Asset Turnover has decreased from the previous year, suggesting the company is less efficient at using its assets to generate sales.