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Thursday, October 31, 2013

Kenanga maintains Hua Yang on Outperform despite two slow quarters

Published: Tuesday October 29, 2013 MYT 10:52:00 AM 
Updated: Tuesday October 29, 2013 MYT 11:19:15 AM

KUALA LUMPUR: Kenanga Research is maintaining its Outperform call on property developer Hua Yang Bhd, with the target price unchanged at RM2.91, for the stock which closed trading yesterday at RM2.11, saying a briefing by the management had reaffirm its positive views.

It cited two factors for the upbeat outlook. One is the stronger billings in the second half of 2014 , which will driven mainly driven by projects nearing completion such as Parc@One South.

Two, immediate billings upon signing of sales and purchase agreement for some its upcoming projects with substructure work already underway.

“We believe our RM620mil estimated sales target for FY14 is achievable, buoyed by more than RM1bil launches in the pipeline for the year and current unbilled sales of RM559mil,” the research house reiterated.

It said despite the two consecutive quarters of underperformance, Hua Yang maintained that their plans were intact and they were set to achieve revenue and sales targets of around RM500mil and RM600mil for FY14 respectively.

“Management also guided that 2H14 will come in stronger on the back of stronger unbilled sales of RM559mil and more than RM1bil’s worth of launches in FY14. Moreover, the company has already commenced piling and substructure works for (projects like) Sentrio Suites and Metia Residences.

“Hence, this would mean immediate billings of around 20% when they rake in SPA sales from these projects by year-end. Meanwhile, there are RM328mil worth of new project launches lining up from now onwards to 1QCY14,” Kenanga Research said.

The research house said Hua Yang remained one of its favourite property developers because it was one of the few to focus on the affordable housing segment, which should enjoy resilient demand for years to come.

Budget 2014’s property cooling measures was not likely to have an adverse effect on Hua Yang as it had no exposure to DIBS (developer interest bearing scheme), it explained.

“We reckon the pool of mass home buyers will continue to grow prior to GST implementation as affordability becomes an overbearing issue.

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