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 :)