Karin Technology Holdings Ltd. :K29-SG: Earnings Analysis: 2017 By the Numbers : September 14, 2017

Karin Technology Holdings Ltd. reports financial results for the year ended June 30, 2017.

We analyze the earnings along side the following peers of Karin Technology Holdings Ltd. – Telechoice International Limited, Noble Group Limited and Courts Asia Ltd. (T41-SG, CGP-SG and RE2-SG) that have also reported for this period.


  • Gross margins widened from 8.03% to 8.87% compared to the same period last year, operating (EBITDA) margins now 3.04% from 2.79%.
  • Year-on-year change in operating cash flow of 726.21% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings rose compared to same period last year, despite decline in operating and pretax margins.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017 2016 2015 2014 2013
Relevant Numbers (Annual)
Revenues 334.92 400.86 548.34 500.25 611.18
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 1.49 2.45 10.63 6.08 8.89
Earnings Growth (YOY) -39.26 -77 74.74 -31.58 -8.84
Net Margin 0.44 0.61 1.94 1.22 1.45
EPS 0.01 0.01 0.05 0.03 0.04
Return on Equity 1.24 2.1 10.08 6.53 10.73
Return on Assets 0.72 1.15 5.49 3.54 5.57

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Earnings Growth Analysis

The company’s year-on-year earnings decline did not come as a result of a contraction in gross margins or because of any cost control issues. Both gross margins and operating margins (EBITDA) margins actually improved over this time frame. Gross margins went from 8.03% to 8.87%, while operating margins improved from 2.79% to 3.04% over this period. For comparison, gross margins were 8.03% and EBITDA margins 2.79% in the immediate last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

K29-SG‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 47.32, compared to last year’s level of 42.42 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

K29-SG‘s change in operating cash flow of 726.21% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Karin Technology Holdings Ltd. engages in the distribution of electronic components and computer products and provides outsourcing services. It operates through the following segments: Components Distribution, Information Technology (IT) Infrastructure, and Consumer Electronics Products. The Components Distribution segment distributes and trades electronic components and cables and provides integrated circuit software application design solutions to electronics manufacturers. The IT Infrastructure segment offers computer data storage management solutions and services. The Consumer Electronics Products segment distributes and retails Bluetooth, connector, integrated circuit, liquid-crystal display unit, microelectromechanical systems, quartz crystal, and semi-conductor. The company was founded by Kin Wing Ng and Yuk Wing Ng in 1977 and is headquartered in Hong Kong.

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