Trending Stock: Hollysys Automation Technologies Ltd. (NASDAQ: HOLI)

Shares of Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) fluctuated between $21.98 and $22.26 before finishing off the trading period lower/higher with -1.08% at $-0.24. The shares cited a trading volume 141,293 shares as compared to its three months average volume of 205,403 shares.

Hollysys Automation Technologies Ltd. (HOLI) recently reported its unaudited financial results for the second quarter and the first half of fiscal year 2019 ended December 31, 2018 (see attached tables). The management of Hollysys, stated: Quarterly revenue and new contract for our railway business were $63.5M and $173.1M, representing an 8.7% YOY decrease and 20.4% YOY raise, respectively. From a half year perspective, revenue and new contract recorded an 8.7% and 61.8% YOY raise, respectively. In high-speed rail, we signed 98 sets of C3 ATP for the quarter, together with numerous advanced and heavy maintenance contracts. We also signed a track circuit contract for the regular speed freight railway from Jingbian to Shenmu, Shaanxi Province, China. In subway business, milestone was achieved as we provided our first “SCADA + Integrated Cloud Platform” solution to Hohhot subway line 1 & line 2, as well as Shenzhen Subway Line 6. We see this as an effective addition to our subway business as we keep executing the steady expansion strategy. For high-speed rail business, calendar 2019 is predictable to be a busy year as 13th Five Year Plan period is entering its final two years. Going forward into the future and given a visible long-term railway construction plan, we will continue to adhere to the diversity strategy for stable and healthy growth, to improve our local service network for more value-adding and differentiated services, and to keep leveraging our strong R&D capacity for the preparation of next generation railway technology.

In overseas business, M&E recorded a quarterly revenue and new contract of $36.5Mand $36.5M, representing a 20.8% and 20.1% YOY raise respectively. From a half year perspective, revenue and new contract recorded a 26.6% and 23.3% YOY raise respectively. Measures taken to improve operation have brought constant benefit to the M&E business, while the geopolitical issues in Middle East as well as the macro economy in Southeast Asia remained to be watched. In our IA overseas business, we continued to work with major domestic SOEs on EPC projects while at the same time, contributed adequate effort to expand our joint venture. We took one step further in the localization of our business as the construction of our India assembly and testing plant was completed. With this we have set a foothold for improved response time to our overseas consumers. Going forward, we expect increasing level of coordination to be built between our overseas and domestic business.

Operational Results Analysis for the Second Quarter Ended December 31, 2018

Comparing to the second quarter of the previous fiscal year, the total revenues for the three months ended December 31, 2018 reduced from $157.4M to $149.5M, representing a decrease of 5.0%. Broken down by the revenue types, integrated contracts revenue reduced by 13.2% to $116.7M, products sales revenue reduced by 39.1% to $5.9M, and services revenue raised by 102.5% to $26.9M.

Overall gross margin not including non-cash amortization of purchased intangibles (non-GAAP gross margin) was 38.2% for the three months ended December 31, 2018, as contrast to 39.4% for the same period of the previous year. The non-GAAP gross margin for integrated contracts, product sales, and services rendered were 30.8%, 72.0% and 62.9% for the three months ended December 31, 2018, as contrast to 34.5%, 67.4% and 68.6% for the same period of the previous year, respectively. The gross margin fluctuation was mainly Because of the different revenue mix with different margins. The GAAP overall gross margin which includes non-cash amortization of purchased intangibles was 38.1% for the three months ended December 31, 2018, as contrast to 39.3% for the same period of the previous year. The GAAP gross margin for integrated contracts, product sales, and service rendered were 30.7%, 72.0% and 62.9% for the three months ended December 31, 2018, as contrast to 34.4%, 67.4% and 68.6% for the same period of the previous year, respectively.

The non-GAAP net income attributable to Hollysys, which excludes the non-cash share-based compensation expenses calculated based on grant-date fair value of shares or options granted, amortization of purchased intangible assets, and fair value adjustments of a bifurcated derivative, was $44.3M or $0.73 per diluted share based on 61.3M diluted weighted average ordinary shares outstanding for the three months ended December 31, 2018. This represents a 22.2% raise over the $36.3M or $0.60per share based on 61.3 diluted weighted average ordinary Million shares outstanding stated in the comparable previous year period. On a GAAP basis, net income attributable to Hollysys was $44.1M or $0.72 per diluted share representing an raise of 21.8% over the $36.2M or $0.60 per diluted share stated in the comparable previous year period.  

Balance Sheet Highlights

The total amount of cash and cash equivalents were $270.8M, $276.9M, and $231.1M as of December 31, 2018, September 30, 2018 and December 31, 2017, respectively.

For the three months ended December 31, 2018, DSO was 157 days, as contrast to 147 days for the comparable previous year period and 170 days for the last quarter; and inventory turnover was 39 days, as contrast to 48 days for the comparable previous year period and 51 days for the last quarter.

HOLI return on assets ratio of the Company was 9.40% and return on equity ratio was 13.50% while its return on investment ratio was 11.30%. The stock as of last trading session moved 37.44% up from its 52 week low and was -22.43% behind its 52 week high.

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