Profit margins trend downward at bourse
The Cambodia Securities Exchange (CSX) has shown gradual declines in average net profit margins of its five listed companies over the past three years.
Net profit margin – the ratio of net income to total revenue – is an important indicator of the financial health of a business.
The average net profit margin of all listed firms was 19.4 percent in 2015, before shrinking to 14.5 percent last year.
CSX’s Listing and Disclosure Department director Lamun Soleil said on Thursday that the decreasing trend of profit margins showed weaker performance compared to past years, but the level wasn’t worrying.
Soleil said that if the decline in net profit margins is impacted by each company increasing its expenditure for expansion, it will prove beneficial in the long run. “It is not good to see a decreasing trend, but a net profit margin above 10 percent is already good,” he said.
A CSX press release on Thursday showed that Phnom Penh Autonomous Port was the only listed firm to show an increase in profit margins over the past three years.
CEO of RHB Indochina Securities Iv Ranarith said the two factors affecting net profit margins include changes in revenue and a company’s expenditure.
He said that while each company’s revenue reports were increasing, the fall in profit margins is not a concern.
“If it falls below 10 percent, it could be an alert, but if it can maintain 15 percent, it is already a good level for business,” he said.