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Hua Yang - Strong Sales To Propel Earnings
Recommended: buy
Target Price: MYR 2.76
Price: MYR 1.99
Hua Yang’s 3QFY14 results were in line with estimates. Earnings were affected by the higher sales and marketing expenses incurred for its new projects. Nonetheless, we expect its 4QFY14 numbers to come in stronger, underpinned by new sales totalling MYR530.1m and unbilled sales of MYR838.2m. The stock’s valuation has become attractive at the current 4.6x FY14F P/E. Maintain BUY and MYR2.76 FV.
Within expectations. Hua Yang’s 3QFY14 net profit of MYR19.7m (-1.1% y-o-y; +59.8% q-o-q) brought its 9MFY14 earnings to MYR44.1m (-17.6% y-o-y) – in line with our estimates. In 9MFY14, earnings were dented by the higher sales and marketing expenses incurred in relation to new launches. Nonetheless, we expect 4QFY14 to come in stronger, as contribution from its two new major projects – Sentrio Suites in Desa Pandan and Metia Residences in Shah Alam – will start to kick in. The company has declared a single-tier interim dividend of 5 sen per share.
9MFY14 sales hit new high. The company’s 9MFY14 new sales amounted to a record MYR580.1m, surpassing the MYR312.2m in total new sales booked in 9MFY13. During 3QFY14, it also recorded maiden sales from Sentrio Suites and Metia Residences, which contributed MYR90.3m and MYR115.1m respectively. Meanwhile, One South continued to contribute strongly, chalking up new sales amounting to MYR114.8m in 9MFY14. Hua Yang’s total unbilled sales are currently at an all-time high of MYR838.2m.
Forecasts. Our forecasts are unchanged for now, pending a briefing on 27 Jan.
Maintain BUY. Our FV is kept at MYR2.76, based on a 20% discount to RNAV. The stock’s valuations are undemanding at a 4.6x FY14F P/E. Given the company’s entrenched position in the affordable housing segment, we believe that it will be able to ride out the negative shortterm sentiment affecting the property sector. The MYR3.05bn worth of projects to be launched beyond FY14 will sustain Hua Yang’s earnings growth over the next 2-3 years.
