EPS of $-0.02 increased by 33.3% from previous year
Gross margin of 56.8%
Net income of -12.17M
"N/A" - N/A
Legend Strategy International Holdings Group Company Limited (1355.HK) QQ3 2024 Results: Revenue Stabilization Amid Acute Leverage and Ongoing Losses in Travel Lodging
Executive Summary
Legend Strategy International Holdings Group Company Limited reported QQ3 2024 revenue of HKD 10.79 million, marking a YoY decline of 41.9% but a QoQ uptick of 12.96%. Gross profit reached HKD 6.13 million with a robust gross margin of 56.8%, yet the company remained loss-making at the operating level, posting an operating loss of HKD 17.74 million and a net loss of HKD 12.17 million. EBITDA was modest at HKD 0.673 million, with an EBITDA margin of 6.2%, underscoring limited operating leverage in near-term profits. The quarter featured a substantial drag from other expenses (HKD 17.02 million) and overall operating expenses of HKD 23.87 million, contributing to a negative EBIT and net income despite some margin resilience in gross profit.
From a cash flow perspective, operating cash flow (OCF) was positive at HKD 3.27 million and free cash flow after minimal capital expenditure was HKD 3.19 million, suggesting some cash generation potential that could support near-term liquidity initiatives. However, the balance sheet reveals material solvency and leverage concerns: total liabilities of HKD 180.4 million vs assets of HKD 75.1 million, and negative equity of HKD 42.4 million. Net debt stood at HKD 151.1 million, with a weak liquidity position (current ratio 0.243, quick ratio 0.237).
Management commentary is not provided in the supplied transcript data, limiting direct quotes to anchor qualitative interpretation. Given the weak profitability, high leverage, and limited liquidity, the outlook hinges on debt remediation, potential asset monetization, and any upcoming guidance on operational efficiency or strategic pivots in the PRC travel lodging market.
Net Income: HKD -12,165,500. Net margin: -11.27% (reported). EPS: -0.0244. YoY EPS: +33.33%; QoQ EPS: -777.78%.
Financial Highlights
Revenue and Profitability
- Revenue (QQ3 2024): HKD 10,790,000. YoY: -41.89%; QoQ: +12.96%.
- Gross Profit: HKD 6,133,500. YoY: -55.23%; QoQ: +30.50%. Gross margin: 56.84%.
- EBITDA: HKD 673,000. EBITDA margin: 6.24%.
- Operating Income: HKD -17,741,000. Operating margin: -1.64%.
- Net Income: HKD -12,165,500. Net margin: -11.27% (reported). EPS: -0.0244. YoY EPS: +33.33%; QoQ EPS: -777.78%.
- Income Before Tax: HKD -19,151,000. Pretax margin: -17.75%.
- Net Debt (as of QQ3 2024): HKD 151,135,000; Total Debt: HKD 164,992,000.
Liquidity and Balance Sheet
- Total Assets: HKD 75,054,000. Total Liabilities: HKD 180,404,000. Total Equity: HKD -42,355,000 (negative).
- Current Assets: HKD 17,799,000; Current Liabilities: HKD 73,272,000. Current ratio: 0.243; Quick ratio: 0.237; Cash ratio: 0.189.
- Cash and Cash Equivalents: HKD 13,857,000. Net working capital: negative.
- Property, Plant & Equipment (net): HKD 54,047,000.
- Debt Metrics: Total Debt / Total Assets = 2.20x; Debt to Equity reported as -3.90 (due to negative equity); Cash Flow to Debt ratio and other coverage ratios are weak or not favorable.
Efficiency and Activity
- Accounts Receivable Turnover: 11.18x; Days Sales Outstanding: 8.05 days.
- Inventory Turnover: 11.58x; Days of Inventory Outstanding: 7.77 days.
- Payables Turnover: 2.15x; Days Payables Outstanding: 41.90 days.
- Cash Conversion Cycle: -26.08 days (favorable only if working capital management remains constructive).
- Revenue per unit economics and asset turnover indicate limited operating leverage in QQ3 2024.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
10.79M
-41.89%
12.96%
Gross Profit
6.13M
-55.23%
30.50%
Operating Income
-17.74M
-519.34%
-927.67%
Net Income
-12.17M
25.89%
-857.74%
EPS
-0.02
33.33%
-777.78%
Key Financial Ratios
currentRatio
0.24
grossProfitMargin
56.8%
operatingProfitMargin
-164.4%
netProfitMargin
-112.7%
returnOnAssets
-16.2%
returnOnEquity
28.7%
debtEquityRatio
-3.9
priceToBookRatio
-2.41
priceEarningsRatio
-2.1
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Earnings call transcript data not provided for QQ3 2024. As a result, no management quotes or theme-based highlights could be extracted from the transcript in the current dataset. Please supply the QQ3 2024 earnings call transcript to incorporate verbatim management commentary on strategy, operations, and market conditions.
N/A
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Forward Guidance
No formal forward guidance was disclosed in the provided data for QQ3 2024. Given the elevated leverage, negative equity, and weak liquidity, the near-term focus would typically center on debt restructuring, capital optimization, and potential monetization of assets, coupled with any cost-reduction initiatives to move toward EBITDA breakeven. Investors should monitor: (i) any announced debt maturity profile and refinancing plans, (ii) potential asset divestitures or strategic partnerships in the PRC travel lodging portfolio, (iii) changes in working capital discipline and expense control, and (iv) any new guidance on occupancy trends in the Chinese travel market and the competitive environment in consumer cyclicals.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
1355.HK Focus
56.84%
-1.64%
28.70%
-2.10%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Baseline view: The QQ3 2024 results reflect a high-leverage, loss-making travel lodging business with a fragile balance sheet. The positive cash flow signal from operations and modest free cash flow demonstrate underlying cash generation capability, but this is not sufficient to offset the structural challenges posed by negative equity and heavy debt. The key to an improved investment thesis lies in visible deleveraging catalysts (debt restructuring, asset monetization, or capital injections) and a credible plan to achieve EBITDA-scale profitability. Absent such catalysts, downside risks from balance-sheet fragility and liquidity constraints remain significant. Investors should closely monitor any management updates on refinancing, asset disposition, occupancy trends in China, and cost-control measures. Given current metrics, the stock remains highly speculative within the Consumer Cyclical sector and should be viewed through a high-risk, high-discovery lens.
Key Investment Factors
Growth Potential
Moderate upside if the company can unlock value from its PPE base (HKD 54.0m) through asset monetization, restructuring, or leveraging underutilized capacity. A recovery in Chinese domestic travel and stabilizing occupancy could improve utilization and EBITDA leverage if fixed costs are controlled.
Profitability Risk
High. Persistent negative equity, substantial debt load (Total Debt ~HKD 165m; Net Debt ~HKD 151m) and weak liquidity (current ratio 0.243) imply leverage risk and potential liquidity stress. Earnings are volatile with a large drag from other expenses and operating costs outpacing revenue growth. Dependency on external financing and market conditions could amplify downside risk.
Financial Position
Balance sheet fragile with negative equity and high leverage. Cash position is modest relative to total debt. Asset quality appears robust (PPE), but liabilities far exceed assets, creating a challenging capital structure. Short-term liquidity concerns persist unless deleverage or funding actions are executed.
SWOT Analysis
Strengths
Gross margin of approximately 56.8% indicates relatively resilient product-cost structure on the revenue base.
Significant PPE (net) of HKD 54.0m providing potential for asset reuse, redevelopment, or monetization if strategically pursued.
Positive operating cash flow in QQ3 2024 (HKD 3.27m) and free cash flow (HKD 3.19m) despite net losses, suggesting some working capital management improvements.
Weaknesses
Negative equity (HKD -42.36m) and high leverage (Total Debt HKD 164.99m; Net Debt HKD 151.14m).
Persistent net loss (net income -HKD 12.17m) and negative operating income (HKD -17.74m) in QQ3 2024.
Severe liquidity strain with current ratio 0.243 and dependence on financing activities.
Opportunities
Potential for debt restructuring, capital raising, or asset disposition to deleverage and improve liquidity.
China travel and lodging market recovery could bolster occupancy and revenue growth if leveraged with cost discipline.
Operational efficiencies and potential re-pricing or product mix shifts to enhance margins.
Threats
Macro headwinds in tourism and consumer sentiment affecting occupancy and pricing power.
Regulatory changes, competition, and continued capital market volatility impacting funding and valuation.
Reliance on external financing and potential dilution if equity is issued to shore up liquidity.
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