Huayang: Marching Toward RM100mil

Huayang FY15Q2 Financial Result

Huayang (RM mil)	FY15Q2	FY15Q1	FY14Q4	FY14Q3	FY14Q2
Revenue	139.5	136.5	198.3	129.9	101.2
PBT	35.2	32.6	51.6	27.5	16.7
PBT%	25.2	23.9	26.0	21.2	16.5
PAT	26.0	23.9	37.8	19.7	12.3
Total Equity	436.9	410.9	387.0	362.4	342.8
Total Assets	828.0	811.0	824.2	764.0	664.2
Trade Receivables	68.1	62.6	75.6	51.6	56.2
Prop dev cost	159.5	145.1	142.2	142.0	87.7
Inventories	9.8	10.0	6.1	5.2	4.5
Other Current Assets	157.0	165.6	162.7	150.7	125.9
Cash	43.9	27.0	34.1	16.5	15.7
Bank Overdraft	10.9	15.0	4.9	8.6	1.9
Total Liabilities	391.1	400.0	437.3	401.6	321.4
Trade Payables	120.4	134.5	167.3	99.8	74.8
ST Borrowings	75.9	74.2	60.7	63.2	63.3
LT Borrowings	161.0	165.2	188.7	203.9	150.6
Net Cash Flow	2.7	-18.2	-0.4	-21.7	-15.8
Operation	58.1	26.1	11.1	-51.8	-75.8
Investment	-23.9	-11.2	-110.8	-96.8	-20.6
Financing	-31.5	-33.2	99.3	126.8	80.5
EPS	9.84	9.07	14.32	7.46	6.23
NAS	1.65	1.56	1.47	1.37	1.73
D/E Ratio	0.47	0.55	0.57	0.72	0.58
Unbilled sales	717.9	756.4	808.1	838.3	558.9

Huayang posted a commendable quarterly result of FY15Q2, with both revenue & net profit inch up 2.2% and 8.8% respectively QoQ.

Half year net profit of RM49.9mil is in line with my rough prediction of RM100mil net profit for its FY15. 

I'll  keep my previous target price of RM3.03 base on projected EPS of 37.8sen and PE ratio of 8x.

Why PE 8x and not 10x? It's nothing other than being  more conservative ahead of expected slowdown in property sector.

Furthermore, even with low PE of 8x, my target price is still higher than those given by most analysts who valuate Huayang base on discounted RNAV.

Anyway, I'll keep the PE of 10x for other property stocks in my portfolio which are Tambun & Matrix.

All 3 property developers mentioned above, together with Scientex, build affordable houses and have townships development, which I think are safer bet in property sector.

       Citywoods @ JB

Huayang has just launched its JB project Citywoods in Sep14. This RM216mil development consists of 2 blocks of 19-storey condominiums with total 417 units priced from RM550 psf.

For its township Bandar University Seri Iskandar in Perak, Huayang plans to launch RM74mil Lavendar 2 in the end of Oct14, which comprises 281 units of DST with price starting from RM244,800 a unit.

Earlier in May14 & Sep14, Ceria 2 (GDV RM36mil, 180 units SST) & D'ecolake (GDV RM31mil, 32 units gated DSSD) were launched and are currently 68% & 32% sold respectively.

Ceria 1 & Lavender 1 (total 538 units) launched last year were fully sold.

There is a plan for a new government hospital in Seri Iskandar township according to Budget 2015. This news will surely enhance property demand in this area.

       BUSI

Huayang plans to launch projects worth RM1.1bil in its FY15 (ends Mac 2015). So far I think it is still yet to officially launch Cube@One South (fully furnished SOHO), Puchong West & new phase in Taman Pulai Hijauan. 

Earlier I mistakenly thought that Cube@One South will be Huayang's last development in One South. Now it seems like there will be another future project "Zeta Residence" right next to Cube.

       Cube & Zeta Residence @ One South

I'm optimistic that Huayang's net profit can reach RM100mil for its FY15. Whether it can continue to grow from this new milestone depends on the success of its future launches.

Huayang's current quarter's net debt/equity ratio drops from 0.55 to 0.47. Its current cash level is the highest in the last 8 quarters. It is still yet to drawdown any amount of cash from the RM250mil Sukuk Murabahah Programme.

I don't mind if Huayang spends more money to buy more strategic land for development.

The management mentioned earlier that they are negotiating an acquisition of land in Bukit Mertajam of Penang. Hopefully investors can hear the good news soon.

Despite market uncertainty at the moment, I'll continue to hold Huayang.