Just 4 days after it announced its foray into Penang property market, Huayang announced another proposed land acquisition in Kuala Lumpur.
It will acquire an 8.1-acres leasehold land in Mukim Batu for RM120mil. This works out to be about RM340 per sq ft.
In Oct11 which is 3 years ago, UOADev acquired freehold land in the same mukim at a cost of RM170 psf only.
According to Huayang's announcement, the current market value for its land is RM121mil and it got a RM1mil discount.
Just for reference, in year 2013, Matrix acquired 2 pieces of freehold land in the heart of Kuala Lumpur near PWTC for RM950 psf.
To recap, Huayang paid RM124 per sq ft (total RM158mil) for its 29.2 acres leasehold Puchong West land which does not carry KL address back in year 2012.
Is RM340 psf really the current market price in Mukim Batu now?
The land deal is expected to be completed in the second half of year 2015, and development is only expected to start in the final quarter of year 2016.
There is still no concrete development plan for it yet but potential GDV is estimated at RM800mil.
So Huayang will spend RM151mil for recent proposed land acquisition in Penang & KL. This will likely push up its net gearing ratio from 0.5x to 0.7x-0.8x region.
It might still have pending land deal in Kota Kinabalu!
With high debts, can Huayang survive amid poor sentiment in general and property market in Malaysia?
Land price will always increase with time, so it's always better to acquire them sooner rather than later.
I'm not sure where is the exact location of its KL land. It seems like it will be next to the busy MRR2 in Kepong/Segambut/Selayang?
As long as the land is strategically located, then I think it is a good decision.
Huayang's land: next to Batu Caves, Sentul, Kepong & Selayang
With its annual net profit expected to be around RM100mil for the next 2 years, I guess it should have no problem to serve its loans in the near future.
Huayang might launch its new projects in Puchong & Seri Kembangan soon in this year. Sales from these 2 projects will be important to its sales target of RM529mil in FY16 ending Mac16.
Thought Sharing : If my memory serves me right, share price of Huayang was badly pressed down for a long period of time couple years ago( maybe 2013) due to its high debt ratio. Since it happened before, I am cautious that it is likely to happen again. I opine that market is waiting for good timing and excuse to trigger it. That is the reason I dare not to accumulate in big quantity during the recent panic sell off in Dec14. With the current further hike on debt ratio, I am even more cautious, else Huayang would have been one of my top holding for its high div yield and high growth. What do you think ?
ReplyDeleteI think the main reason Huayang's share price dropped in the end of 2013 was bcoz of its poorer than expected quarterly results, but may be the high debt also played a part I'm not too sure.
DeleteHigh growth like previous years is difficult in current property market so it might not be good to accumulate big. I just think that Huayang is very undervalued base on PE ratio and has a good management that still target growth that's why I decided to invest in it. Replenishing land is utmost important and hopefully its high unbilled sales can help to ease its cash flow before the real bear strike...