Huayang: Affordable Homes To Lead The Way

Huayang FY15Q3 Financial Result

Huayang	FY15Q3	FY15Q2	FY15Q1	FY14Q4	FY14Q3
Revenue	155.5	139.5	136.5	198.3	129.9
Gross Profit	59.3	45.2	43.2	65.9	47.2
Gross%	38.1	32.4	31.6	33.2	36.3
PBT	43.2	35.2	32.6	51.6	27.5
PBT%	27.8	25.2	23.9	26.0	21.2
PAT	30.9	26.0	23.9	37.8	19.7
Total Equity	449.4	436.9	410.9	387.0	362.4
Total Assets	877.3	828.0	811.0	824.2	764.0
Trade Receivables	73.3	68.1	62.6	75.6	51.6
Prop dev cost	175.5	159.5	145.1	142.2	142.0
Inventories	9.8	9.8	10.0	6.1	5.2
Other Current Assets	180.3	157.0	165.6	162.7	150.7
Cash	44.1	43.9	27.0	34.1	16.5
Bank Overdraft	14.4	10.9	15.0	4.9	8.6
Total Liabilities	427.9	391.1	400.0	437.3	401.6
Trade Payables	118.2	120.4	134.5	167.3	99.8
ST Borrowings	82.2	75.9	74.2	60.7	63.2
LT Borrowings	187.4	161.0	165.2	188.7	203.9
Net Cash Flow	-0.5	2.7	-18.2	-0.4	-21.7
Operation	71.1	58.1	26.1	11.1	-51.8
Investment	-50.7	-23.9	-11.2	-110.8	-96.8
Financing	-20.8	-31.5	-33.2	99.3	126.8
EPS	11.72	9.84	9.07	14.32	7.46
NAS	1.70	1.65	1.56	1.47	1.37
D/E Ratio	0.53	0.47	0.55	0.57	0.72

As expected, Huayang posted a great quarterly result for its FY15Q3, in which revenue and net profit improve 11.5%  & 18.8% respectively QoQ.

Its 9MFY15 net profit of RM80.9mil is 82.2% more than previous year's corresponding period.

Apart from this, gross profit margin at 38% & PBT margin at 28% also reach record high.

Unbilled sales pick up slightly from RM717.9mil last quarter to RM733.3mil, as sales in Q3 surged 35.8% QoQ to RM149.8mil.

Sales achieved in Q2 & Q1 are RM110.3mil & RM81.9mil respectively.

Total sales after 9MFY15 is RM342mil, which is RM168mil short of its latest sales target of RM510mil for FY15.

Recent history suggests that Huayang kept its words by accomplishing mission impossible in achieving FY14 total revenue of above RM500mil.

Can Huayang do it again this time?

       Citywoods


It certainly looks tough as RHB analyst reported that Huayang's sales performance of its newly-launched high-rise projects in FY15Q3 (Oct14-Dec14) is very discouraging.

Property market sentiment is poor and loan rejection rate is high at the moment.

Final phase of One-South with GDV RM195mil has just achieved 20-25% sales for units launched in Q3FY15, while Citywoods (GDV RM216mil) has only 11% take-up rate since launched in Sep14.

As its Q3 sales and unbilled sales pick up, initially I thought that most of it should be contributed by Citywoods...

So, its more affordable landed properties in Taman Pulai Hijauan & Bandar Universiti Seri Iskandar must be selling well I guess.

Its Puchong West development is expected to be launched soon in 1HFY16.

Sales target for FY16 is set at RM529mil, while it expects its total revenue to reach RM800mil in FY18.

       The Gardens @ Polo Park

Despite commendable operating cash flow, net debt to equity ratio increases to 0.53x compared to 0.47x in previous quarter as most cash are spent in land acquisition and dividend payment.

It still has not utilize its RM250mil Sukuk Murabahah Programme for further land acquisition.

Huayang proposes a first interim dividend of 5sen for FY15 which is similar to previous 2 years' corresponding periods.

I made a mistake earlier as I thought that Huayang has a minimal dividend payout policy of 40%. It seems like it does not have a fixed policy but plans to pay at least 25% back to shareholders.

I think Huayang should be able to register RM105mil net profit for its FY15, with a guesstimated EPS of 39.8sen. 

Base on fair PE of 8x, target price will be revised to RM3.18.

If it pays only 25% as dividend because of current high gearing, it will pay about 10sen dividend or 4.5% yield at share price of RM2.20.

       Upcoming integrated commercial & residential project opposite The Mines

Huayang's target price by analysts are low at RM2.20 (Kenanga) & RM2.28 (RHB) using the RNAV valuation method.

In order to increase its RNAV, Huayang needs to increase its total GDV by replenishing its landbank.

I will continue to hold Huayang's shares at the moment, and hope that it can close a good land deal soon.