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Tuesday, October 29, 2013

HuaYang to gain from affordable housing


KUALA LUMPUR (Oct 29): Kenanga Research has maintained its outperform
call on Hua Yang Bhd with target price (TP) of RM2.91, as it may net
future gains from the affordable housing segment.

Following a briefing by the company yesterday, the research house in a
note today said it believes Hua Yang's RM620 million sales target for
FY14E is achievable, buoyed by more than RM1 billion worth of property

鈥淗ua Yang continues to be one of our favourite property developers as it
is one of the few to focus on the affordable housing market which will
enjoy resilient demand for years to come.

鈥淲e also believe that it will not be impacted by the recent Budget 2014
property cooling measures as Hua Yang does not have any exposure to
DIBS,鈥?it said.

Hence, the research house reckons that the pool of mass home buyers will
continue to grow prior to GST implementation as affordability becomes an
overbearing issue.

Kenanga Research noted that a total RM1 billion GDV worth of projects
will be launched this year which includes six new projects with total
GDV of RM690 million (e.g. Sentrio Suites, Metia Residences, The
Gardens@Polo Park, Jalan Abdul Samad@Johor, Ridgewood@Bercham Permai and
Anjung Bercham Megah, Perak).

The breakdown between Klang Valley and other regions will be 43:57, it

Assuming a conservative take-up rate of 70% on the RM1 billion GDV, the
research house believes its sales projections for FY14E of RM613 million
(+52% year-on-year) are realistic.

However, it has revised down its GP margin for FY14E by 1ppt to 32% due
to higher construction cost resulting from labour shortage.

The company's management highlighted its intention to maintain GP above
30% and believes that the labour cost issue would be moderate after
completion of public infrastructure, typically the biggest component of
any project, it said.

It has also maintain earnings estimates for FY14E and FY15E of RM77
million and RM112 million respectively.

It noted that the estimates for FY14E is achievable supported by
stronger billings in 2H14, which will be driven mainly by projects that
are near to completion such as Parc@OneSouth.

The research house added that substructure works are underway for some
of the upcoming new project launches, which mean billings will be
immediate upon SPA sales.

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