TA Securities A Member of the TA Group COMPANY UPDATE Friday, 04 March, 2011 FBMKLCI: 1,056.88 MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Sector: Property Page 1 of 8 Hua Yang Berhad TP: RM2.03 (+88%) An Undiscovered Gem in The Property Industry Last traded: RM 1.08 THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* BUY Tan Kam Meng, CFA +603-2072-1277 ext:1644 [email protected]www.taonline.com.my We are initiating coverage on Hua Yang Berhad (HuaYang) with a BUY recommendation. We derived our target price based on a PE multiple of 6x CY11 EPS, which is at 50% discount to our target PER of 12x for small- cap property stocks. This represents an attractive upside of 88%. Hua Yang Berhard (HuaYang) is a homegrown property developer with a market capitalization of RM116mn. Listed in 2002, HuaYang currently has 5 on-going developments namely One South and Symphony Heights in the Klang Valley, Bandar Universiti Seri Iskandar in Perak, Taman Pulai Indah in Johor and Senawang Link in Seremban. The Chairman Tan Sri Dato’ Seri Dr. Ting Chew Peh is an independent non- executive director of HuaYang. He was the Secretary-General of MCA during 1990-2005. Meanwhile, the current day-to-day operation of HuaYang is at the helm of CEO, Ho Wen Yan, who is an architect by profession. Currently, the Ho family owns 33% of HuaYang. Investment case 1) Niche player to benefit from 2011 Budget; 2) One South to be the key earnings driver; 3) Trading at steep discount to NTA. We project Hua Yang to chalk up new sales of RM300mn for FY11, RM355mn for FY12 and RM336mn for FY13. Based on a chew rate of 43-58%, we expect net profit of RM25mn for FY11, RM40.4mn for FY12 and RM52.7mn for FY13. Earnings Summary (RM’mn) FYEMar 31 FY09 FY10 FY11F FY12F FY13 Revenue 100.0 103.5 162.9 273.7 351.1 EBITDA 13.9 16.8 35.5 57.7 74.6 EBITDA margin (%) 13.9 16.2 21.8 21.1 21.3 Pretax profit 12.6 15.8 33.8 54.6 71.2 Net profit 8.7 11.6 25.0 40.4 52.7 Core net profit 8.7 11.6 25.0 40.4 52.7 EPS* (sen) 8.1 10.7 23.2 37.4 48.8 EPS growth (%) 32.8 32.3 116.5 61.3 30.5 PER (x) 13.3 10.1 4.7 2.9 2.2 GDPS* (sen) 2.1 2.5 4.0 4.0 4.0 Div yield (%) 1.9 2.3 3.7 3.7 3.7 Core ROE (%) 4.8 6.1 12.1 17.2 19.0 * Adjusted for 1:5 bonus issue Share Information Bloomberg Code HYB MK Stock Name HUAYANG Stock Code 5062 Listing Main Market Share Cap (mn) 108.0 Market Cap (RMmn) 116.6 Par Value 1.00 52-wk Hi/Lo (RM) 1.27/0.625 12-mth Avg Daily Vol ('000 shrs) 349.0 Estimated Free Float (%) 54.44 Beta 0.49 Major Shareholders (%) Heng Holdings - 30.65 Cham Poh Meng - 14.91 Forecast Revision FY11 FY12 - - 25.0 40.4 Consensus 24.4 28.7 102.6 140.7 Financial Indicators FY11 FY12 Net Debt / Equity (%) 30.8 25.8 -9.3 5.3 Price / CFPS (x) nm 20.25 ROE (%) 12.1 17.2 ROA (%) 7.5 10.6 1.9 2.3 0.6 0.5 Share Performance (%) Price Change HUAYANG FBM KLCI 1 mth (1.8) (1.6) 3 mth 13.1 0.4 6 mth 6.2 5.0 12 mth 45.6 17.4 na FCPS (sen) NTA/Share (RM) Price/NTA (x) Forecast Revision (%) Net profit (RMm) TA's / Consensus (%) Previous Rating
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TA SecuritiesA Member of the TA Group
C O M P A N Y U P D A T E
Friday, 04 March, 2011
FBMKLCI: 1,056.88 MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048 Sector: Property
Page 1 of 8
Hua Yang Berhad
TP: RM2.03 (+88%) An Undiscovered Gem in The Property Industry Last traded: RM 1.08
THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* BUY
Land held for development 131.2 147.5 177.5 207.5 237.5
other 19.9 28.5 28.3 28.0 27.7
Total non current assets 157.7 182.9 217.2 251.0 284.5
Property development costs 38.3 68.7 68.7 68.7 68.7
Inventories 6.6 7.9 8.0 8.1 8.1
Trade and other receivables 33.3 45.2 46.6 48.0 49.4
Current tax assets 0.8 0.0 0.0 0.0 0.0
Deposit and cash 12.1 3.7 9.3 30.8 44.8
Other 3.5 2.7 2.7 2.7 2.7
Total CA 94.7 128.2 135.3 158.2 173.8
Trade and other payables 16.4 21.9 22.6 23.3 24.0
Borrowings 2.7 16.8 16.8 16.8 16.8
Others 4.2 30.4 30.4 30.4 30.4
Total CL 23.3 69.2 69.8 70.5 71.2
Net current asset 71.4 59.0 65.5 87.7 102.6
Share capital 90.0 90.0 108.0 108.0 108.0
Share premium 6.7 6.7 0.0 0.0 0.0
Reserves 89.2 99.1 108.5 144.6 193.0
Total shareholders' funds 185.9 195.8 216.5 252.6 301.0
MI 0.5 1.8 1.8 1.8 1.8
Term loan 37.8 40.0 60.0 80.0 80.0
Others 4.8 4.4 4.4 4.4 4.4
Total non current liabilities 42.6 44.4 64.4 84.4 84.4
Table 4: Cash flow statement
FYE Mar 31 2009 2010 2011F 2012F 2013F
PBT 12.6 15.8 33.8 54.6 71.2
Op profi t be fore cha nge i n WC 12.7 16.7 35.5 57.7 74.6
CFO 10.3 12.7 25.0 40.8 53.3
Ca pe x (30.0) (33.6) (35.0) (35.0) (35.0)
Othe rs 1.6 0.2 0.0 0.0 0.0
CFI (28.3) (35.1) (35.0) (35.0) (35.0)
Ne t borrowi ngs 31.2 10.2 20.0 20.0 0.0
Di vi de nd (1.7) (1.7) (4.3) (4.3) (4.3)
CFF 29.5 8.5 15.7 15.7 (4.3)
Change in cash 11.4 (13.9) 5.7 21.4 14.0
Table 5: Financial analysis
FYE Mar 31 2009 2010 2011F 2012F 2013F
Current ratio (x) 4.1 1.9 1.9 2.2 2.4
Net gearing (%) 15.2 26.7 30.8 25.8 17.0
NTA/share (RM) 2.0 2.1 1.9 2.3 2.7
P/NTA (x) 0.5 0.5 0.6 0.5 0.4
ROE (%) 4.8 6.1 12.1 17.2 19.0
ROA (%) 3.7 4.1 7.5 10.6 12.1
FCF per share (sen) (16.7) (20.7) (9.3) 5.3 17.0
EV/EBITDA (x) 10.5 10.0 5.2 3.2 2.2
TA SecuritiesA Member of the TA Group 04 Mar-11
Page 7 of 8
Appendix 1: On-going projects
One South, Seri Kembangan
GDV: RM750mn
Leasehold
Selling price:
- Retail : RM550-750psf
- Office: RM350-750psf
Mixed development comprising:
- 1,261 units of serviced apartment : soft
launched 61 units
- 384 units of shops/Office : sold 73 retail
shops en-bloc
- 2 block office towers : future development
Symphony Heights, Selayang
GDV : RM206mn
Leasehold
Selling price: RM135,200-RM306,500 per units
Serviced apartment:
- 544 units (phase 1) : Sold
- 219 units (phase 2) : Sold
- 183 units (phase 3) : Sold
Bandar Universiti Seri Iskandar, Perak
GDV: RM721mn
Leasehold
Selling price:
- Residential: from RM119,800/unit
- Commercial: from RM260,000/unit
Land size: 777 acres
- Developed: 255 acres (GDV: RM158mn)
- On-going: 29 acres (GDV: RM53mn)
- Undeveloped: 523 acres (GDV: RM510mn)
TA SecuritiesA Member of the TA Group 04 Mar-11
Page 8 of 8
Taman Pulai Indah, Johor
GDV: RM818mn
Freehold
Selling price:
- Residential: RM134,000-RM300,000/units
- Commercial: from RM150,000/units
Land size: 477 acres
- Completed: 286 acres (GDV: RM465.4mn)
- On-going: 103 acres (GDV: RM134mn)
- Undeveloped: 88 acres (GDV: RM198mn)
Senawang Link, Negeri Sembilan
GDV: 45mn (85 units shops and factories)
Leasehold
Selling price:
- Phase 1: from RM251,000/unit
Commercial and industrial development comprising:
- Phase 1: 22 units 11/2 terrace factories – 30%
sold
Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein.
for TA SECURITIES HOLDINGS BERHAD (14948-M)
MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048
(A Participating Organisation of Bursa Malaysia Securities Berhad)