How Do I Choose A Stock To Buy?

A reader asked me how do I filter the stocks to buy. It's not easy to answer.

To make it short, I don't have a systematic way when it comes to selecting a company for investment. 

I'm not sure whether there is any established or better way to select or filter from a list of close to one thousand listed companies.

Basically, I have done it in many ways and I'll briefly discuss about them here.

First, I'll start with how I come to know a stock.

Screen through every single companies painstakingly

This was the method I used when I first joined the stock market back in year 2005. At that time, internet information was scarce. 

There was a thick book like a "Yellow Pages", which contained the information of all the listed companies in KLSE such as the business nature, historical revenue/profit, financial ratios such as EPS, ROE, PE ratio, debt/equity, as well as historical price chart.

I can't remember the name of this white & green colour book now as I have lost it many years ago.

Before I bought my first shares, I read a few investment books and I decided to follow their suggestion by looking at the fundamentals of the companies. So I made a stock selection criteria of ROE >15%, EPS growth >15% for at least 3 years & PE <10.

With these criteria, I screened through every companies in that thick book one by one. At last I came out with a few companies that matched the criteria. I still remember that the first 2 stocks I bought were Mahsing & WCT, and I made a profit from them.

Anyway, that kind of book is not published anymore due to the abundance of information which can be easily obtained on the internet.

Use KLSE Screener

Many years ago I came across this tool. I'm sure that most readers know what is it all about. You just need to key in your selection criteria (PE, ROE, DY, EPS etc) and the software will filter for you.

This is very easy and fast, and you can do it on your computer or smartphones. However, I seldom use it and don't really use it to select stocks since I started this blog.

From articles and news

Basically I do not actively look for a stock to buy, as investing in stock market is not a big part in my life, yet. I am quite passive.

I don't read business news and watch the stock market everyday. I do it sporadically when the interest comes and when I have the time.

You know, there are many articles that promote a stock in investment forum such as i3investor, some are very good and some are not. 

When a company secures a contract, reports good profit, ventures into new business or encounters headwinds, the news will certainly appear on online news portal such as The Star, The Edge and for Chinese, Sin Chew & Nan Yang. 

If the headlines of an article or news catch my attention, I will read them and sometimes it will lead me to study the company and then invest in it.

Analyst reports

I have trading accounts with Public Investment Bank & Hong Leong Investment Bank. However, I do not login to view all the reports because I only login when I plan to trade.

I read those analyst reports from i3investor, thanks to all the people that share them there. 

Analyst reports are a very important and useful tool for me. There are many information that retail investors like us have no access into. So, we need to depend on professional analysts who attend the company's AGM, investor briefing session or interview the management.

Regarding the target price derived by analysts, just take it as a reference and come out with your own target price. 

Of course different people have different opinion, and no one can predict the future with 100% accuracy. For Bumi Armada as example, someone gives it a target price of 10sen, while some value it at 56sen. That's a huge difference.

Now that Armada is at 26sen, who do you want to follow?

Quarterly Financial Reports

A listed company must release financial report every 3 months, we can get a lot of information from it.

Besides the revenue & profit, we can have a glimpse at its latest balance sheet & cash flow. The management will also explain the performance of the quarterly results and give a prospect of its business.

When a company has a good financial quarter, sometimes it catches my attention to further study it, IF I happen to bump into it as I only read 10-20 of those quarterly reports every 3 months.

I think this is a very common way for me to identify a stock to buy.

Before 2013, I only looked at the revenue and profit, EPS, ROE & PE ratio while making a decision.

After that, I include the balance sheet and cash flow, although not in a very detail fashion. I don't have accounting background, and have no one to ask except Mr Google when I have doubts.

I don't read annual reports unless from my invested companies or companies I plan to study. 

There is another way that can help me to find a good stock which I haven't use yet, which is subscribing to fundamental-based "Sifus" or other experienced investors.

I know that it might be a very good way to earn quick bucks from doing this. Many newbies and speculators pay the fee, and will surely buy when a stock is recommended as "buy call". This might push up the share price and quick profit can be made just like that.

Subscribing to such service can increase my chance of catching a stock with good potential, as I mention earlier that I'm quite passive in stock market and can't screen through all those listed companies and read all the announcement by myself.

At the moment, I still haven't join such groups. I'm still all alone.

How do I filter those stocks to decide whether to invest in them or not?

There are no strict rules now like I used to have in the past. Last time I set criteria for EPS growth, PE ratio, ROE, D/E ratio, DY etc. I usually don't go deeper into ROIC, FCF, PEG ratio & EV as I'm not a true value investor.

Let me show a few real examples of how I bought a stock in the past, if I still remember them correctly.

Latitude Tree

I first noticed Latitude after it released a very good quarterly results in Nov 2013. Then I studied its previous quarterly reports, annual reports and company website. I checked its previous announcement from Bursa Malaysia website. There was no analyst cover and not many news on this company. I found out from Bursa announcement that it was in the process of acquiring the remaining shares of its very profitable Vietnam operation. I projected the future earning and it's a no-brainer. 

Inari

If my memory serves me right, I first knew about Inari from a news article in Jun 2013. At that time, Inari was still a small little-known company and had proposed to acquire much bigger Amertron of the Philippines. It certainly caught my attention and the same process started. I checked its previous quarterly & annual reports, previous Bursa announcement, searched for online news and visited the company website. 

I remember that before I bought Inari shares at around 70sen (22sen now after adjustment), its share price has just rallied from 30-40sen to 70sen in a short period of time. Most investors commented that since it had already gone up 100%, it was very risky to buy at that time. I bought it anyway. Sometimes we have to ignore the noise of forummers and believe in our own judgement. Inari proves to be a big success for me. 

KESM

I came across an article or news shared by someone in i3investor about KESM in Jan 2016. It looked good to me and I decided to study it further. I saw that there was significant jump in its latest 2 quarters and by simple forward PE estimation, it was deemed undervalued for me. At that time its share price was falling from RM6 and I got it at RM4.80 and then around RM3.90 when it dropped further, with average price of RM4.42. 

It's lucky for me that its financial performance were good and share price kept increasing to over RM22. I sold some at RM20 and the rest at only RM8+. 

Geshen

I can't remember exactly how I came to know this company, which was a very cold and unknown company. From my record, I bought its shares on Mac 2015. I think may be from its previous quarterly result announcement in Feb 2015 which showed a significant jump in its net profit. It's not a very exciting result but I found out that it has just disposed its two loss-making subsidiaries and planned to acquire a growing profit-making peer. I felt that it would start a new page of growth and bought its shares. It was a great investment for me.

YOCB

This was just a coincidence. I was studying a company with a name of Yokohama in Aug 2013. When I searched for it in Bursa website, I saw another company alongside it with a strange name of "YOCB" which attracted my attention. That's how I started to study this company out of curiosity. I bought it because of its low PE ratio and good dividend. It was not a bad investment for me though I might have sold it too early.

Tambun

This is easy. I bought my first property from Tambun Indah and I certainly knew it well. As I was more focused in property investment at that time between 2008 and 2013, I knew a lot of other property companies and their projects.

At that time Tambun bought a vast landbank cheaply at Bandar Tasek Mutiara, which is located at Seberang Perai Selatan of Penang. We know that the nearby Batu Kawan is the next big thing. New projects were launched aggressively and each of them was rapidly sold out. So, it's also a no-brainer during such a property boom. 

Huayang 

Not every property stocks I bought at that time made money. Of all my completed buy-sell transaction up to today, the largest loss was Huayang, followed by Tropicana, both are property stocks. Huayang needs no introduction to investors at that time. Its revenue & profit was growing steadily, gave away mouth-watering dividends and multiple bonus issues. 

I felt like I missed the boat and always dreamed of owning its shares. Finally I became its shareholder in Sep 2014 at RM2.32, the price level which later proved to be at the peak. Even though subsequent quarterly results were good even with EPS of 11sen for 5 consecutive quarters, its share price just didn't go up but continued to drop instead. If we give a PE of 10x the share price should be at least RM4. Finally I cut loss at RM1.83 after 1 year and 4 months. Property was in the negative trend and we could not beat the trend.

PPHB

I found out this stock after it released its FY19Q1 results in May19. The result was nothing spectacular, just that the market gave it a low PE of around 5x. After studying it like usual, there seemed to be slow growth in this company and I believed that its products have more demand nowadays. I bought in May19 and only in the end of 2019, the stocks price started to jump.

I would say that most of the time I find a company to invest through its quarterly financial report, while PE ratio and growth prospect are the main things I look at to decide whether to invest in it, although the debt ratio & simple cash flow still play a part.

So, how should you filter or select a company to invest in? The answer is read more, and do your own homework.

Property: Huayang, Tambun, Matrix

Most property stocks in Bursa Malaysia reversed their uptrend since Oct14.

Property stocks have been falling for one and half years now and I still do not see any encouraging signs of recovery.

Many property developers delay their new launches and registered poorer sales in 2015.

However, there are some who manage to take advantage of lower supply in the market to rake in more sales in 2015.

These companies are mostly those who serve a niche market with their exceptional branding or strategic location.

As I have less time for blogging, I will briefly review the quarterly financial results of those property stocks I have.

Currently I have 2 property stocks in my portfolio (excluding Scientex) after selling all Huayang shares in Jan16.

HUAYANG

Huayang's FY16Q3's financial result is good as expected.

It posted a PATAMI of RM30.2mil, with cumulative 9-month PATAMI of RM88.7mil which is 10% higher than FY15's corresponding period.

When I bought Huayang's shares in Sep14, even though I was aware of property market slowdown, I predicted that Huayang can post strong financial results for at least FY15 & FY16, and give at least 13sen dividend for 2 years.

This is actually not too hard to predict base on its previous new sales trend and unbilled sales.

If new sales manage to beat market expectation in FY15 & FY16, then the results could be even better.

Now we are at the end of Huayang's FY16 (which ends on Mac16), financial results and dividends are good as expected but there is no surprise in new sales.

EPS average about 11sen a quarter and what should be its fair value base on PE ratio?

Anyway, I failed to predict the PE ratio market would like give it.

This shows that PE ratio is nothing if market sentiment is poor in the sector.

New sales so far after 9MFY16 stands at RM255mil, which is unlikely to reach RM400mil in the whole year of FY16. Huayang achieves new sales of RM460mil for FY15.

So unbilled sales drop from RM733mil a year ago to RM530mil now.

It's not hard to predict that Huayang's FY17 will be poorer.

I have sold all my shares in Huayang at a loss of 13.3%. However, it does not mean that I don't like Huayang or it is a poor company. It's just part of portfolio management.

For FY16, Huayang should be able to give the same 13sen dividends like previous FY. This is a good 7.1% yield at current share price of RM1.82.

TAMBUN

Tambun posted a good FY15Q4 result but a fair value gain on investment property of RM6.67mil was included in the PBT.

Even though revenue drops 20% for FY15 compared to FY14, PATAMI manage to stay about the same at slightly more than RM100mil..

Just like Huayang, Tambun's new sales drop from RM429mil in FY14 to RM263mil in FY15. Unbilled sales drop from RM427mil to RM324mil in the same period of time.

However, I think this does not reflect the true sales status of Tambun as it was affected negatively by delay in development approval.

New project Raintree Park 2 contributed RM55mil new sales in Dec15, while Avenue Garden is still yet to be counted in.

I think these 2 projects (combined GDV RM300mil) should be able to give at least RM200mil of new sales to Tambun in FY15 if there is no delay.

Pearl City Mall, even though only a small 2-storey mall, will open to public in 2 weeks time. 

Besides, Jit Sin SPS branch should be able to start student intake for year 2017, and the plan to set up a private hospital in Pearl City is still on-going.

For 2016, new sales might not be that good but Tambun should not have a problem to surpass FY15's figure.

It should give around 9 sen dividend for FY15, which means a dividend yield of 6.8% at current share price of RM1.33.

MATRIX

Despite soft property market, Matrix still manage to sell more properties in 2015 which I think is rare in the sector.

Matrix bags a record-breaking RM805mil new sales in FY15 compared to RM630mil in FY14. Thus, unbilled sales also rise to RM633mil from RM429mil.

In FY16, Matrix will concentrate mainly on its Bandar Sri Sendayan, where it will launch projects worth more than RM1bil there in 2016.

It will build a new extreme park in BSS to make the township more appealing, while I think Matrix may end up operating a private hospital in the future.

Matrix has declared total 14.4sen (adjusted) dividends for FY15. This is a 6.0% yield at current share price of RM2.40.

Huayang Joins The Bustling Jalan Baru

Huayang really surprised me by announcing another land acquisition in Penang mainland.

It will acquire all the shares of G Land Development for RM16.6mil, who will acquire 6 parcels of freehold land in Prai, Penang mainland for RM25mil.

So the total cost will be RM41.6mil, or about RM110 psf.

The land has an area of 8.59 acres (net 6.98 acres), is 3km from Penang bridge and is accessible through federal road (Jalan Baru).

Remember that in my last post about Huayang, I wrote that I saw Huayang's new sales office at The Frontage fronting Jalan Baru?

At that time I was a bit puzzled why Huayang sell its property in Bukit Mertajam but set up its sales office in Prai, though both location are actually not far away.

Now I know the reason.

          Huayang's new sales office at The Frontage, Jalan Baru

When talking about Bukit Mertajam, the hot area is Jalan Song Ban Kheng.

When talking about Prai area, the hot area now is undoubtedly Jalan Baru.

Jalan Baru is bustling right now, with new condos such as Pinang Laguna, Palma Laguna and The Signature completed.

Condos nearby include Prominence, BM City Mall, Kelisa Residence, K Residence & Primero Heights.

Besides, there are also other upcoming condos by Aroma & Wern Properties along Jalan Baru.

Mydin Hypermarket which was opposite of Huayang's new sales office, was just opened last month.

A new KFC drive-thru restaurant was also being set up recently.

Belleview Group, a famous private developer in Penang, planned a "bigger than Mid-Valley" shopping mall and office tower on the other side of the road.

This land that Huayang proposed to acquire is previously owned by GSD Land who has already planned a development called "The Presidence" here since 2012.

The Presidence comprises a 44-storey 480-unit services apartment and 15 units shop offices.

According to the announcement, Huayang's initial plan is to develop 480 units of service apartment, 148 units of condominiums and 16 units of double storey shops with estimated GDV of RM311mil.

Will there be any oversupply situation in Jalan Baru? May be there is, to be frank, but I think property here will have good demand because of its superb location.

While that stretch of Jalan Baru is a booming area, the land that Huayang acquires is not perfect as it is located next to high voltage powerlines.

          Huayang's land at Jalan Baru, Prai

So, there might be a concern whether Huayang's project here will sell well or not.

Definitely some buyers/investors will not consider this project just because of the powerlines.

However, this issue may not concern some other buyers/investors as long as the location, concept and price are good.

Tambun Indah's completed apartment Kelisa Residence launched in 2011 is also located right next to this high voltage powerlines but it is completely sold out.

In Klang Valley, there are quite a lot of projects developed next to the powerlines but it seems like it doesn't matter too much.

Anyway, we can only wait and see whether Huayang has made a correct or wrong decision.

Current subsale market asking price for adjacent Pinang Laguna is about RM300-350psf, while newer Palma Laguna is about RM350-400psf.

Huayang might price its project here at RM350-400psf I guess.

       Part of Huayang's land seen from Pinang/Palma Laguna

How many pieces of lands that Huayang has in Penang now?

It's a bit confusing to me.

Initially in Jan15, Huayang first invaded Penang by acquiring 2 parcels of land in Bukit Mertajam (4.9 acres + 3.14 acres), though it seemed to announce only one of them (4.9 acres).

Then penangpropertytalk website in Sep15 revealed an upcoming development by Huayang in Bukit Minyak, which is within Bukit Mertajam.

This is confirmed as Huayang's subsidiary Tinggian Development has submitted planning permission to develop 90 units strata-titled landed houses and one block medium cost 41-storey apartment with 268 units in Aug15, and it has actually been approved in Oct15.

Initially I thought this Bukit Minyak land is the 3.14 acres land that Huayang acquired in Jan15, even though it seems too small to accommodate such development.

In Nov15, it was reported that Huayang has aborted one of the earlier land deals in Bukit Mertajam, which is the land with size 3.14 acres.

Is this aborted deal referring to Bukit Minyak land? I'm not sure but I don't think it is. The planning permission was actually approved by the authorities.

One day after Huayang submitted its application of planning permission for Bukit Minyak land through Tinggian Development, a company known as G Land Development also submitted its building plan for its phase 1 project at Jalan Baru which comprises a 44-storey 480-unit serviced apartment.

This building plan has been approved since early Oct15.

Now we know that G Land will be acquired by Huayang. So Huayang might start to sell this project as soon as when the land deal is completed in the first quarter of calendar year 2016.

It should contribute to its sales in FY17 starting from 1st Apr 2016.

As a shareholder of Huayang and a Penangite, I view this acquisition positively and hope that the deal will not be terminated like the previous two.

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.

Huayang's Land In Bukit Minyak?

In January this year, Huayang announced that it has acquired a piece of 4.9-acre land in Bukit Mertajam (BM) town center for RM22mil.

However, according to TA research at that time, Huayang will acquire 2 pieces of land in BM. The other land measures 3.14 acres and costs RM9mil.

I think Huayang did not announce the acquisition of "Land 2" above until today, or did I miss it somewhere?

In its latest FY15 annual report, Huayang mentions that it has acquired 8.04 acres land in BM for RM31mil, which is exactly the same as reported by TA.

The lands are planned for a condominium block and serviced apartments respectively, with estimated total GDV of RM314mil.

It is obvious that Land 1 has commercial title while Land 2 has residential title.

The location of Land 1 is confirmed at BM town center near Jit Sin Independent School but there is no mention on the location of Land 2.

Recently penangpropertytalk website reveals an upcoming property development by Huayang in Bukit Minyak which is pending approval by the authority.

This development comprises: 

• 28 units 3-storey terrace  (gated & guarded)
• 62 units 2-storey terrace  (gated & guarded)
• 41-storey condo with 268 units

The location of the land is at Bukit Minyak/Juru area, next to a driving school which I used to get my motorcycle license.

       Huayang's Land 2 in BM?

Bukit Minyak/Juru area is notorious for congested traffic & foreign workers as it is sandwiched between lots of industrial areas.

However, I opine that it is still a good buy for Huayang if the location is really as shown.

The question is: Can a 3.14-acre land accommodate 90 units terrace houses and a block of 41-storey condominium (and also a block of low cost apartment)? It is about the size of 2-3 football fields.

I think it should be OK if the land shape is good.

For comparison, the land area of Huayang's Mines South condominium project is 3.7 acres.

This proposed 41-storey condominium is even higher than the 39-storey Exo Horizon at Juru Sentral not far away. It could be the highest building in the region.

If Huayang can get the approval to build gated & guarded landed community and condominium on this piece of land, then I think the potential GDV should be much higher than RM70.7mil. It could be above RM150mil.

Huayang should not face too much difficulty selling landed G&G houses here, but it needs to come out with something special in order to make the condominium a success.

That cross junction in front of AEON Big in Bukit Minyak should get a flyover ASAP...

Huayang: Poor Sales A Concern

Huayang FY16Q1 Financial Result

Huayang	FY16Q1	FY15Q4	FY15Q3	FY15Q2	FY15Q1
Revenue	142.6	152.1	155.5	139.5	136.5
Gross Profit	51.5	53.2	59.3	45.2	43.2
Gross%	36.1	35.0	38.1	32.4	31.6
PBT	40.2	42.5	43.2	35.2	32.6
PBT%	28.2	27.9	27.8	25.2	23.9
PAT	29.9	29.7	30.9	26.0	23.9
Total Equity	495.8	465.9	449.4	436.9	410.9
Total Assets	944.2	923.2	877.3	828.0	811.0
Trade Receivables	72.9	88.9	73.3	68.1	62.6
Prop dev cost	161.5	167.7	175.5	159.5	145.1
Inventories	10.5	9.9	9.8	9.8	10.0
Other Current Assets	200.7	189.6	180.3	157.0	165.6
Cash	62.6	40.9	44.1	43.9	27.0
Bank Overdraft	4.6	7.4	14.4	10.9	15.0
Total Liabilities	448.5	457.4	427.9	391.1	400.0
Trade Payables	135.1	141.5	118.2	120.4	134.5
ST Borrowings	78.1	78.6	82.2	75.9	74.2
LT Borrowings	195.4	192.1	187.4	161.0	165.2
Net Cash Flow	24.4	3.4	-0.5	2.7	-18.2
Operation	25.6	115.9	71.1	58.1	26.1
Investment	-6.7	-86.6	-50.7	-23.9	-11.2
Financing	5.6	-26.0	-20.8	-31.5	-33.2
Dividend paid	0	44.9	31.7	13.2	13.2
EPS	11.32	11.25	11.72	9.84	9.07
NAS	1.88	1.76	1.70	1.65	1.56
D/E Ratio	0.43	0.51	0.53	0.47	0.55
Unbilled sales	660.8	701.9	733.3	717.9	756.4

I expect Huayang to post average quarterly net profit of RM25-30mil in its FY16, so its FY16Q1 net profit of RM29.9mil is not a surprise.

The main concern is the fact that Huayang just achieved RM81.7mil new sales in its FY16Q1 (Apr-Jun15), which is only 16% of its target annual sales of RM500mil, or 18% of FY15 overall sales of RM460mil.

As a result, unbilled sales drop to RM661mil from RM702mil a quarter ago.

Nevertheless, latest sales were achieved without any launch of new project in the last 2 consecutive quarters. So the RM81.7mil figure are not too bad I think.

Huayang is unlikely to launch new project in current quarter of FY16Q2 (Jul-Sep15). Upcoming project Mines South will probably be launched in the end of CY15.

Targeted new launch for FY16 remains at RM633mil. Huayang still keeps its FY16 sales target intact at RM500mil, with RM426mil of already-launched projects available for sale.

Take-up rate of its final phases at One South has been poor so far. Sales of Cube and Zeta Residence improve slightly to 36-39% from 20-29% in previous quarter.

Citywoods's take up rate is even worse at 31% so far, up from 25% a quarter ago despite attractive selling price at RM500-600 psf compared to other high-rise projects at RM700-1000 psf in Johor Bahru, according to TA Securities.

While Huayang's financial results in FY16 should remain good, it certainly needs to improve its sales to at least RM500mil a year to sustain this performance.

In near term, its Klang Valley projects such as Mine South and Puchong West will be key.

The remaining unsold units at One South should get a boost from the proposed MRT2 route which has a station right opposite One South across the KL-Seremban Highway. A dedicated link bridge between the MRT station and One South has been proposed.

Meanwhile, the management will continue to acquire strategic land to expand its GDV.

Huayang's TTM EPS stands at 44.1sen. At share price of RM1.90, it is currently trading at PE ratio of merely 4.3x.

Huayang paid 12sen dividend for its FY14, which means a 38% payout ratio. If it decide to pay 35% in FY15, then it will be total 14.5sen. 

It has given 5sen for FY15, and final dividend should be declared  at the end of this month.

I think it is more likely to pay out 30% which means 12.5sen in FY15. If this is the case, dividend yield will still be an attractive 6.6% at current share price.