Overview

Cathay International Holdings Limited (CTI) is a Pharmaceuticals & Biotechnology company in the PRC (People's Republic of China). The company is looking forward to becoming a market leader through strong domestic demand for premium quality healthcare products in the Chinese market. The company is having an employee base of 1,600 professionals in the PRC region, including more than 20 business development and specialist corporate offices located in Shenzhen and Hong Kong. The company also made an investment in hotels in Shenzhen.

The Cathay International Holdings stock had declined by over 15 per cent due to poor financial performance in the H1 FY2019.

Recent News
On 30th August 2019, Cathay International Holdings announced its interim results ending June 30th, 2019.

Financial Highlights – H1 Financial Year 2019 (USD, thousand)

(Source: Interim Report, Company Website)

In the first half of the financial year 2019, the company’s revenue stood at $38,315 thousand as against $49,190 thousand in H1 FY2018. The decline in the revenue was driven by a dip in the revenue from all reportable segments for the period. The Gross profit was at $16,241 thousand in H1 FY2019 versus $20,554 thousand in H1 FY2018. With the increase in the company’s administrative expenses in the first half of the financial year 2019, the company reported an operating loss of  $5,699 thousand in H1 FY2019 versus an operating profit of $1,126 thousand in H1 FY2018. The LBT (Loss before tax) for the first half of the financial year 2019 was at $2,430 thousand versusa PBT (Profit before tax) of $3,365 thousand in H1 FY2018. InH1 FY2019, the company’s loss for the period was at $2,832 thousand versus a profit for the period of $3,347 thousand in H1 FY2018. The company’s loss for the year attributable to the shareholders stood at $5,134 thousand in H1 FY2019 as against a loss for the year attributable to the shareholders $1,866 thousand in H1 FY2018. The basic and diluted loss per share for H1 FY2019 was 1.36 cents versus a basic and diluted loss per share 0.49 cents in H1 FY2018.

Share Price Performance

Daily Chart as at August-30-19, before the market close (Source: Thomson Reuters)

On August 30, 2019, at the time of writing (before the market close, at 3:36 PM GMT), Cathay International Holdings Limited shares were trading at GBX 4.00, down by 15.78 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 9.30/GBX 3.00. The group’s stock is reflecting lower volatility as against the benchmark index based on the company’s beta of 0.60.

Conclusion

The company’s financial performance for the first half of the financial year 2019 had declined significantly as compared to previous year data. The company’s revenue declined in the first half of the financial year ending 2019, the profitability margins have remained stagnant or declined.

The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors.

The company will review its strategy for cosmeceutical business as domestic cosmeceutical market had to offer great business potential in the coming years. The company is also looking forward to making operational changes to cope up with the changing Chinese economy.

On the basis of above rationale, we recommend investors to keep a “Watch” on the stock at the closing price of GBX 4.75 (as on 29 August 2019), while we look for any upcoming catalysts.

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