Tuesday, 27 October 2015

Huayang: Ready To Buy More Land

Huayang FY16Q2 Financial Result

Huayang (RM mil) FY16Q2 FY16Q1 FY15Q4 FY15Q3 FY15Q2
Revenue 150.6 142.6 152.1 155.5 139.5
Gross Profit 50.3 51.5 53.2 59.3 45.2
Gross% 33.4 36.1 35.0 38.1 32.4
PBT 38.2 40.2 42.5 43.2 35.2
PBT% 25.4 28.2 27.9 27.8 25.2
PAT 28.7 29.9 29.7 30.9 26.0

Total Equity 524.4 495.8 465.9 449.4 436.9
Total Assets 941.3 944.2 923.2 877.3 828.0
Trade Receivables 55.3 72.9 88.9 73.3 68.1
Prop dev cost 144.3 161.5 167.7 175.5 159.5
Inventories 19.8 10.5 9.9 9.8 9.8
Other Current Assets 201.3 200.7 189.6 180.3 157.0
Cash 76.1 62.6 40.9 44.1 43.9
Bank Overdraft 6.7 4.6 7.4 14.4 10.9

Total Liabilities 416.9 448.5 457.4 427.9 391.1
Trade Payables 129.5 135.1 141.5 118.2 120.4
ST Borrowings 75.3 78.1 78.6 82.2 75.9
LT Borrowings 170.8 195.4 192.1 187.4 161.0

Net Cash Flow 36.0 24.4 3.4 -0.5 2.7
Operation 81.9 25.6 115.9 71.1 58.1
Investment -22.0 -6.7 -86.6 -50.7 -23.9
Financing -23.9 5.6 -26.0 -20.8 -31.5

Dividend paid 0 0 44.9 31.7 13.2

EPS 10.87 11.32 11.25 11.72 9.84
NAS 1.99 1.88 1.76 1.70 1.65
D/E Ratio 0.34 0.43 0.51 0.53 0.47

Total sales 93.10 82.00

Unbilled sales 607.2 660.8 701.9 733.3 717.9

I expect Huayang's FY16 (ends on Mac16) net profit to at least match FY15's figure of RM110mil, if not better.

With RM58.6mil net profit in the first half of FY16, it is certainly on track.

However, poorer sales in the first half of FY16 does not do it any good.

Huayang manage to sell RM175mil worth of property so far this FY, despite the lack of new launch.

Its unbilled sales drop further to RM607.2mil as a result.

Its One South Cube & Zeta Residence have achieved take up rate of just 46% as of Sep15.

Its projects face a loan rejection rate of as high as 50%! This means that its sales can be much better if more buyers can get their loans approved like usual.

Anyway, it is good to hear that the management is still confident that its FY16 sales target of RM500mil can be achieved.

In order to do so, it should launch high GDV new projects in the second half of FY16.

These projects include Mines South with a GDV of RM368mil. It is expected to be launched in the last quarter of FY16 (Jan-Mac16).

       Mines South beside the lake

It is a surprise to me that Huayang is reported to have acquired 9.5 acres freehold land in Juru, Bukit Mertajam for RM21.7mil (RM52.50psf) in Aug15.

This land should be the land I wrote about in early September. I thought that was part of the land deal announced earlier in Jan15.

Now it looks like this is another new and latest acquisition.

Huayang might launch its project on this land sooner than expected.

It plans to build 90 units of landed gated properties and a 41-storey 268-unit medium cost condominiums which are estimated to carry a GDV of RM180mil.

Recently when I was driving along Jalan Baru, Perai, I noticed a familiar logo at the side of the road.

Guess what, it is Huayang's logo on a recently-completed business complex known as Frontage.

I think this should be Huayang's newly set up sales office in the northern region.

However, I'm disappointed that it is on the highest 4th floor, not the ground floor...

On its latest balance sheet, net debt/equity ratio has dropped to 0.34x which is the lowest in the past 2.5 years.

So, Huayang will continue its landbanking activity and the management expects at least one/more land deal in the second half of FY16.

Huayang paid 12sen (38%) and 13sen (30%) dividends respectively for its FY14 & FY15.

I expect at least 13sen for FY16 which translates into dividend yield of 7.0% at current share price of RM1.85.

For Huayang, we are not talking about growth in short to mid term. It's all about dividends now.


  1. dun u know that all banks hv been laying off employees lately?

    Now waiting for M and P banks

    1. Banks nowadays are also aggressive in offering personal loan

  2. Not a bad quarter, the sentiment is just gloomy on properties

    1. Sales have to reach RM500mil this FY, if not...

  3. I just finish reading 2 books written by cold eye, in the midst of reading, I thought of you. It's because I found your investment practice are very close to what cold eye preaches.
    I think you must have 'internalised' his teaching :)
    In his book, not much scientific stuffs, only simple EPS, PE and DY. What more important thing he stresses is the ability to see the potential and growth of a business.

    He also mentions cyclical stocks would take 3 to 5 years to go up or come down. Property stocks started coming down since year 2014, so this means property stocks may stay low till 2017 to 2019. That is long...

    1. After reading his books, what I really remember is "buying shares of a company is to do business with the company". I might have unconsciously follow his way, but I think I still need to learn how to sell like him though.

  4. Hi BD,

    What do you think about EG ? Can it be like VS in future ?


    Best regards

    1. I was quite amazed to see EG's revenue close to RM1bil! However, historically this is not a very thriving company to me, with razor thin profit margin. Its high debt/equity of >1 is also very worrying. Latest FY15 result should still be poor if not because of high special income & "tax income". However, I think it is still a capable company in this industry (high orders/revenue). If it gets lucky like VS with huge higher margin contracts, then it will probably be like VS.

      After the change of shareholder & management in 2014, there is always a chance that things may get better but I'm not sure how will it improve. Its plan and target given by directors mentioned in the link u provided above looks interesting and very exciting indeed. The question is whether it is really achievable or not. It's always easier to talk the prospect.

      So for me it's a higher risk higher return stock. If you believe that the company can achieve what the directors predict, then you can buy its shares now. The author in the link above predicts 2018 revenue at RM2bil, I'm not sure this is given by directors or just prediction from author. I just want to say that this figure is extremely optimistic. This figure is even higher than VS's latest record high revenue.

    2. Hi BD,

      Million thanks for the reply. The only stock I regret that I didn't buy is Jadi. I was hesitate to buy after reading your "Jadi tak Jadi" article and now Jadi seems like already Jadi..sigh....


    3. You're welcomed :) Jadi must be supported by its financial performance in order to become jadi, coming result is key.

  5. Hi BD,

    Can you explain what's the difference between "Unbilled Sales" and the "Accrued Billing" (in "Other current assets")? Aren't they the same thing?


    1. Hi SJ Lum, actually I'm not the right person to answer your question above, as I only know little about accounting.

      I take it like this: A developer sell a property worth RM500k. When the construction progress reach 30%, RM150k will be in the revenue and RM350k in unbilled sales. However, developer might not able to get full RM150k in cash at that point of time. If the buyer/bank paid the developer RM100k up to that time, then RM50k will be in accrued billings.

      Hope someone can clarify.

  6. Thanks for the reply, BD. I did some further research, and I think this is how it works.


    100 houses built
    Each house is worth RM1,000
    GDV = 100 x 1000 = RM100,000
    Total cost = RM50,000

    30 unit is sold
    20% costs (RM10,000) is spent

    Recognised revenue = 20% x GDV = RM20k (follow the cost %)
    Registered sales = 30 unit x 1000 = RM30k
    Unbilled sales = 30k - 20k = RM10k

    (let's say) Revenue billed to customers = RM15k
    Accrued billing = RM20k - 15k = RM5k

    1. Thanks SJ Lum. I think you're probably right.