Quick take: Hua Yang rises 14.8% on return to the black

KUALA LUMPUR: Hua Yang Bhd shares rose in early trade Thursday as Kenanga Research upgraded it to outperform as its share price has seen a sharp retracement recently.

The developer gained 14.86%, or 5.5sen to 42.5 sen with 617,300 shares done.

Hua Yang posted a net profit of RM5.77mil for the third quarter ended Dec 31, 2018, from a net loss of RM815,000 a year ago mainly attributed to property development driven by higher sales contribution from Astetica Residence, Seri Kembangan and Bandar Universiti Seri Iskandar.

Its revenue for the perid rose 37% to RM68.42mil against RM49.91mil in the previous year’s corresponding quarter.

For the nine-month period, its net profit surged almost five fold to RM8.68mil from RM1.77mil a year ago, while revenue increased 41.2% to RM199.51mil from RM141.30mil.

Kenanga Research said Hua Yang’s 9M19 core net profit (CNP) came above the house and consensus estimates at 133% due to stronger-than-expected property billings and associate contribution.

Property sales of RM239.7mil came above our sales target as we were previously overly conservative.

“Upgrade FY19-20E CNPs by 68-71% after assuming higher sales and stronger associate contribution. Upgrade to outperform but maintain target price at 41 sen,” Kenanga said..

“Despite the challenging operating landscape in the property sector, we think that Hua Yang is on the right path given their continuous effort in clearing inventories as shown by the 29% drop (from FY18 to 9M19) in inventories from completed projects.

“Moreover, we are also comforted by the group’s commitment to lower its net gearing as shown by the recent disposal of 30% stake in Kajang Heights Land for RM21.0mil completed in October 2018 that saw net gearing now at 0.70x,” Kenanga said.

The research house expects to see more aggressive efforts to reduce gearing with FY19-20E net gearing estimated at 0.69-0.67x.

Unbilled sales currently stand at RM217.3m, providing slightly less than one year of earnings visibility.


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