Kenanga lowers earnings estimates on Hua Yang due to soft property outlook

KUALA LUMPUR: Kenanga Research said it is less optimistic over Hua Yang Bhd's sales target of RM400mil in FY19 due to the soft property outlook.

The research house had been briefed that Hua Yang's sales target is backed by its unsold GDV of about RM570mil, coupled with RM284mil of planned new launches.

"However, we are less optimistic on the property market outlook due to the influx of affordable housing priced around RM350.0k flooding into the market. Hence, we are maintaining our sales target of RM246.8m. of planned new launches," it said.

Kenanga also expects Hua Yang's associate Magna Prima's launches to be slow as there not many planned launches in the near term. 

It added that Magna Prima has launched the first phase of its The View Residence in Shah Alam , of which they only managed to sell 19 units so far, perhaps due to its high pricing range.

According to Kenanga, Hua Yang managed to secure 19.8 acres of freehold land in Kajang last year with an estimated GDV of RM800mil, which will help it sustain its launch pipeline in the region for five to six years. 

"Going forward, we expect the operating landscape in the sector to remain challenging. Hence, we believe that HUAYANG needs to prioritise their focus in clearing inventories and aggressively drive sales from on-going projects. Unbilled sales of RM178.9m which is only sufficient for another 1-2 quarters."

Kenanga said it is lowering its FY19-20E earnings by 12% to 9% as it lowers its margin assumptions in anticipation of further cost escalation.

It maintained its market perform call on the counter with a target price of 46.5 sen from 46 sen previously.