Tuesday, 26 May 2015

Huayang Falls Short Of Its Target

Huayang FY15Q4 Financial Result

Huayang FY15Q4 FY15Q3 FY15Q2 FY15Q1 FY14Q4
Revenue 152.1 155.5 139.5 136.5 198.3
Gross Profit 53.2 59.3 45.2 43.2 65.9
Gross% 35.0 38.1 32.4 31.6 33.2
PBT 42.5 43.2 35.2 32.6 51.6
PBT% 27.9 27.8 25.2 23.9 26.0
PAT 29.7 30.9 26.0 23.9 37.8






Total Equity 465.9 449.4 436.9 410.9 387.0
Total Assets 923.2 877.3 828.0 811.0 824.2
Trade Receivables 88.9 73.3 68.1 62.6 75.6
Prop dev cost 167.7 175.5 159.5 145.1 142.2
Inventories 9.9 9.8 9.8 10.0 6.1
Other Current Assets 189.6 180.3 157.0 165.6 162.7
Cash 40.9 44.1 43.9 27.0 34.1
Bank Overdraft 7.4 14.4 10.9 15.0 4.9






Total Liabilities 457.4 427.9 391.1 400.0 437.3
Trade Payables 141.5 118.2 120.4 134.5 167.3
ST Borrowings 78.6 82.2 75.9 74.2 60.7
LT Borrowings 192.1 187.4 161.0 165.2 188.7






Net Cash Flow 3.4 -0.5 2.7 -18.2 -0.4
Operation 115.9 71.1 58.1 26.1 11.1
Investment -86.6 -50.7 -23.9 -11.2 -110.8
Financing -26.0 -20.8 -31.5 -33.2 99.3






Dividend paid 44.9 31.7 13.2 13.2 29.5






EPS 11.25 11.72 9.84 9.07 14.32
NAS 1.76 1.70 1.65 1.56 1.47
D/E Ratio 0.51 0.53 0.47 0.55 0.57






Unbilled sales 701.9 733.3 717.9 756.4 808.1


Compared to previous quarter, Huayang's revenue & PAT for its final quarter of FY15 are marginally lower.

This is within my own expectation as I don't expect the result to be anything close to FY14Q4.

Unbilled sales drop slightly to RM701.9mil from RM733.3mil a quarter ago, due to relatively poorer sales in FY15Q4 at RM118mil.

Net gearing remains at 0.5x level while cash flow stays positive in FY15 despite RM84mil spent on land acquisition.


Huayang FY15 FY14 FY13 FY12 FY11
Revenue 583.6 509.9 408.7 306.4 188.9
Revenue growth % 14.5 24.8 33.4 62.2 82.5
PBT 153.4 112.4 95.3 72.5 34.3
PBT% 26.3 22.0 23.3 23.7 18.2
PAT 110.6 82.2 70.5 53.0 25.1
PAT growth % 34.5 16.6 33.0 111.2 116.4






EPS 41.88 31.12 27.43 21.22 10.08
NTA 1.76 1.47 1.69 1.86 2.05
ROAvgE 25.2 22.4 22.8 19.9 11.5
DPS 13.00 12.00 12.00 12.38 5.63
Net Gearing 0.51 0.55 0.26 0.27 0.30


For the whole FY15, growth momentum still continue impressively but it will be a challenge to maintain that in FY16.

Huayang plans to reduce its new property launch in FY16 to RM633mil amid softer property market. It will launch Mines South (GDV RM368mil) in early FY16 but Puchong West will be postponed to FY17.

It has set revised sales target of RM500mil for FY16, which is slightly lower than initial target of RM529mil.

Its overall FY15 new sales of RM460mil falls short of its own target of RM510mil.

At its peak, Huayang's annual sales recorded RM735mil in FY14.

Thus, continuous growth is not easy and so the attractiveness of Huayang will be its attractive dividend yield.


       Location of Mines South


Huayang will pay total 13sen dividend for its FY15, which represents only 30% payout ratio. However, dividend yield is 6.2% at share price of RM2.08.

I expect another 13sen dividend for FY16. If sales in the near future are poor, dividend in FY17 might drop.

With actual FY15 EPS of 41.9sen, my target price for Huayang will be RM3.35 base on PE of 8x.

This indicates a 60% upside from current share price of RM2.08 which is the main reason I put my money in Huayang last year, besides its good dividend and management.

While all analysts use RNAV to rate property stocks, I decided to stick to my own PE method. So it's a lesson learned that PE does not work in property sector especially during a slow market.

So, don't take my target price seriously.

Nevertheless, we know that Huayang is not a bad company. The management has a clear plan to replenish its landbank and GDV at this stage, and wait for the next property up-cycle.

At the moment, I think I will keep Huayang's shares, and regard it as "diversification" into dividend stocks :)

Wednesday, 20 May 2015

Can Heng Huat Achieve RM15mil PATAMI In FY15?

Heng Huat FY15Q1 Financial Result

HHG (RM mil) FY15Q1 FY14Q4 FY14Q3 FY14Q2 FY14Q1
Revenue 26.5 23.2 23.1 24.1 21.3
Gross Profit 10.6 8.8 10.4 10.4 9.7
Gross% 40.0 37.9 45.0 43.2 45.5
PBT 3.5 3.5 2.3 3.7 3.8
PBT% 13.2 15.1 9.9 15.2 17.6
PATAMI 2.9 3.4 1.2 2.7 3.0






Biomass Rev 19.9 18.1 18.6 19.7 16.7
Mattress Rev 12.6 9.8 9.1 9.2 9.1
Biomass OP 3.6 3.6 4.3 4.2 3.5
Mattress OP 0.3 -0.1 -0.1 -0.2 0.3






Total Equity 70.0 68.3 64.8 43.1 40.4
Total Assets 114.3 109.8 110.5 95.3 90.5
Trade Receivables 26.7 22.3 19.7 21.4 19.2
Inventories 4.8 5.9 6.3 5.4 4.6
Cash 14.1 15.2 18.8 2.6 2.4






Total Liabilities 39.9 36.8 42.2 49 47.4
Trade Payables 13.1 11.2 9.2 11.4 9.4
ST Borrowings 11.4 9.6 12.1 15.5 15.3
LT Borrowings 14.3 15.3 19.0 20.5 21.4






Net Cash Flow -1.2 13.0 16.6 0.4 0.2
Operation 4.9 13.5 8.7 6.5 2.6
Investment -4.3 -7.7 -7.5 -5.1 -1.8
Financing -1.7 7.3 15.5 -1.1 -0.7






Dividend paid 1.0 0.0 0.0 0.0 0.0






EPS 1.42 1.67 0.64 1.69 1.91
NAS 0.34 0.38 0.38 0.27 0.25
D/E Ratio 0.17 0.14 0.19 0.77 0.85


Due to increase average selling price of its biomass materials & related products, Heng Huat's FY15Q1 revenue improves 24.4% compared to corresponding quarter of FY14Q1 last year.

However, because of higher raw material price as well, gross profit increases by only 9.3%. Gross profit margin reduces from 45.5% to 40.0% in the same period.

Compared QoQ to preceding quarter of FY14Q4, revenue increases 14.2% but PBT is flat mainly due to higher selling and admin cost (annual increment and higher bonus).

Quarterly revenue from both biomass & mattress divisions reach record high but operating profits stay flat. Revenue from mattress division actually shows a good growth of 28% QoQ.

HH not only sells those super hard mattress made from biomass fiber, it also sells spring mattress. So it might benefit from accelerated completion of new properties in the country.

Other than that, balance sheet and cash flow remain fairly healthy.


       Fibre Star Pocket Spring Mattress


HH has paid its first ever interim dividend of 0.5sen (RM1.03mil) for its FY15 earlier this year. There is no dividend for FY14. There might be another round of dividend for FY15.

Its share price has rallied from 50sen to above 70sen level since the start of Apr15. I actually do not expect it to climb so fast.

The surge in share price was fueled by an article in The Edge on 27 Apr in which Heng Huat's executive director "hinted" that the company can achieve revenue and net profit of RM100mil (+10%) and RM15mil (+20%) respectively in its FY15.

So, latest Q1 PATAMI of RM2.9mil must have disappointed many investors and speculators thus its share price drops significantly.

Besides, Heng Huat also proposed bonus issue of 1:2 and transfer to main board as expected. These proposals have been submitted to Bursa Malaysia for approval.

Is it a trend now to give bonus issues soon after listing?


       "We got annual salary increment and higher bonus. How about you?"


Export sales make up 65-70% of HH's sales and China alone takes up 45%. Other countries are South Korea, Australia etc.

Director mentioned that strengthening of China RMB against RM will benefit HH. Its Forex gain in Q1 is just RM161,000.

Low crude oil price and slow down in China's growth could be concerns to HH. It's good that HH can explore new markets esp in Europe.

Using the company's forecast RM15mil PATAMI as a guide, target FY15 EPS for HH will be 72.9sen. So my target price will be 73sen base on PE ratio 10x.


Monday, 18 May 2015

Inari: New Outsource Contract From Avago?

Inari FY15Q3 Financial Result

INARI FY15Q3 FY15Q2 FY15Q1 FY14Q4 FY14Q3
Revenue 228.3 227.9 221.9 223.9 191.8
Gross Profit 47.7 49.4 43.4 52.0 40.9
Gross% 20.9 21.7 19.6 23.2 21.3
PBT 38.0 40.0 33.9 31.4 27.2
PBT% 16.6 17.6 15.3 14.0 14.2
PATAMI 38.140.3 33.8 30.8 25.0






Total Equity 511.5 352.9 313.4 260.2 231.1
Total Assets 720.1 583.5 544.3 487.5 461.4
Trade Receivables 136.8 128.1 143.4 137.3 131.8
Inventories 139.9 134.0 135.8 137.8 137.7
Cash 260.4 141.9 89.5 65.3 53.2






Total Liabilities 210.2 230.6 230.9 226.9 231.1
Trade Payables 92.2 107.3 107.9 120.0 118.4
ST Borrowings 42.1 44.8 46.8 36.4 33.0
LT Borrowings 21.9 14.9 15.1 18.6 15.8






Net Cash Flow 181.9 65.0 14.0 20.9 8.8
Operation 110.6 88.3 23.7 41.2 12.4
Investment -52.7 -44.9 -34.4 -43.4 -30.4
Financing 124.1 21.5 24.7 23.0 26.9






Dividend paid 49.3 21.0 10.1 29.1 11.6






EPS 5.69 6.59 6.00 6.23 5.19
NAS 0.71 0.58 0.56 0.53 0.48
Net D/E Ratio Net cash Net cash Net cash Net cash Net cash


There is nothing really special in Inari's latest FY15Q3 financial result. Revenue and PATAMI are good as expected due to high product demand in its RF division & favourable foreign exchange.

Perhaps results should be better if not because of major customer Avago's own capacity constraint.

Forex gain in this quarter is RM6.8mil, in which M6.3mil is realized. This is quite a significant one-off gain.

Cash piled up tremendously due to RM118mil cash from rights issue.

As a result of the rights issue and also the non-stop warrant conversion, EPS is diluted.

Anyway, if cash collected can be put into good use to expand its business, EPS will eventually pick up later.

Its new production facility P13 in Bayan Lepas Penang has started operation in CY15Q2 and is expected to increase its revenue and gross profit slightly in its FYQ4. Net profit may or may not increase initially due to start-up and staff cost.




On latest development, a 6-storey building (222k sq ft) will be built besides P13 (166k sq ft) to cater for 3 expansion projects which are:

  • RF NDI prober turnkey
  • wafer sort extension (phase 2)
  • assemble PAD (EMI) program

I really don't know what are all those things, so I still invest in things that I don't understand well...

Initially 4 storeys will be built in phase 1 from Sep 2015 and it is expected to complete in 9 months.

According to analysts, Inari might get another outsource contract of new products from Avago. If this turns into reality, Inari's earning will surely take another leap. (Look at SKPRES)

Don't forget that Inari still has a piece of land in Batu Kawan for future expansion.

Meanwhile, Inari will expand its facility at Clark Field, Philippines to cater for Avago's demand for fiber-optics related products. It will also work to increase Amertron's net profit margin to 10%.



Div (sen) FY15 FY14 FY13 FY12
1st 1.8 (0.4) 1.1 (0.4) 0.8 0.6
2nd 1.8 (0.5) 1.1 (0.4) 0.9 0.6
3rd 2.1 1.2 (0.8) 0.9 0.8
4th
1.8 1.0 (0.9) 0.8


A third interim dividend of 2.1sen was declared. It is 0.1sen higher than corresponding period of FY14.

As long as the demand for smartphones & tablets remain high, Inari should be able to do well. So I'll just continue to hold Inari, and also Globetronics.