PETALING JAYA: Hua Yang Bhd’s performance is expected to rebound after a major kitchen sinking exercise, although it may take some time for the group to regain its former glory.
The company is working towards stabilising its operational and financial performance, while on the lookout for pockets of landbank to expand.
Like other property developers, Hua Yang is affected as the housing sector remains sluggish and this is compounded by the adverse effects of the Covid-19 pandemic.
However, the company is better prepared this time around and its associate Magna Prima Bhd’s regularisation plan is also on track.
Based on the factors, TA Securities Research has not made any changes to its earnings forecasts after a conference call with the management of Hua Yang recently.
The research house continues to retain its “hold’’ call on the stock with a target price of 32 sen per share.
Hua Yang’s sales galleries are closed due to the lockdown while its construction sites are allowed to operate at a 60% capacity.
However, with growing acceptance among younger buyers to shop for property online, the company’s sales have improved over the quarters in financial year (FY) 2021.The property sales momentum is likely to sustain into FY22, underpinned by the pent-up demand and favourable policies.
The company will focus on affordable products in the northern region, such as its bread and butter products in Bandar Universiti Seri Iskandar township, Perak and the Aston Acacia Serviced Apartments (phase two) jn Bukit Mertajam, Penang.
Hua Yang expected FY22 new sales to at least match its performance in FY21.
Its net gearing stood at 0.51 times with total net borrowings reduced by 21% year-on-year to RM223.5mil, thereby meeting its target of paring down its net gearing level to 0.5 times by end-FY21.
It also aims to reduce the group’s net gearing to have sufficient capital buffer to weather the challenging period and to seek out land banking opportunities, according to TA Securities Research.
It added that the company is on the lookout for pockets of landbank in a strategic location for a quick turnaround.
“Assuming a funding mix of 80:20 debt-to-equity ratio, we estimate that Hua Yang will be able to replenish its landbank with gross development value potential of RM500mil to RM800mil, before reaching its internal net gearing limit of not more than 0.6 time, ” said the research house.