Thursday, 17 April 2014

Huayang: The Future Is Still Bright

Huayang's share price hovers around RM1.75 to RM1.85 for quite some time. Yesterday it decided to move up to a higher altitude.

It is not a big surprise because Huayang does not belong there at share price below RM2.

After posting a lower than expected revenue and profit in the first half of FY14 (Apr13-Sep13), Huayang responded by producing a record breaking quarterly result in the subsequent quarter.

To my surprise, its share price fell further instead of recover. 

I think its whole FY14 net profit should at least reach RM60mil, compared to RM70.5mil in the previous year. This gives it an EPS of at least 23sen for its FY14. So I think its fair price should be RM2.30.

       Huayang's previous financial performance

Perhaps the high gearing has hindered its share price's progress. 

Huayang's borrowings increase substantially after it acquired more lands in the past 2 years, especially the RM158mil prime leasehold land at Puchong which has an estimated GDV of RM1.5bil.

Even though the balance sheet has been stretched, I think the move is still warranted as prime land's value will surely rise rapidly and it is better to secure them early.

Last year, Huayang launched new projects aggressively and it has resulted in a surge in its unbilled sales.

       Huayang's Quarterly Unbilled Sales

Its quarterly unbilled sales are generally on a rise, especially the latest quarter of FY14Q3. So it is highly likely that its revenue and profit in the near future are going to rise as well.

Furthermore, the RM1.5bil Puchong mixed development is still yet to be revealed.

       Huayang Puchong land - Immediately south of LDP West Tol

Personally, despite its recent set back, I think that Huayang is still a company that is worth to invest in for long term.

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