We returned from HUAYANG analysts’ briefing yesterday feeling assured of its pipeline launches and future prospects, which may include landbanking in the next six months. We have raised our TP to RM2.60 based on unchanged discount of 26% on a higher RNAV of RM3.52 (previously RM2.91) as we have built in GDV replenishment assumption of RM1.6b. However, we would prefer the group to fund part of its landbanking with cash-calls rather than relying fully on its RM250m Sukuk program to ensure that its balance sheet remains manageable. Currently, the market is in the mood for RNAV expansion plays, as highlighted in our recent Property Sector report. Following our upward revision in TP, we upgrade HUAYANG to OUTPERFORM from MARKET PERFORM. At our TP, dividend yields remain attractive at 5% whilst FY15E PER is decent at 6.7x.
Timely progress. Management reiterated that this year, they will be focusing on operating efficiencies and on-time delivery of its ongoing projects, which has unbilled sales of RM756.5m. Currently, most of its ongoing projects are on track while Gardenz@One South Phase 3 is expected to be completed and handed over in 4QCY14. Management also indicated that there would not be any major impact on its ongoing project due the upcoming implementation of GST as they have already locked in most of their on-going construction contracts with suppliers and contractors. Hence, we believe that there will be minimal impact to its margins given that most of its “core costs” has been locked in.
Pipeline launches on track, sales maintained. We are maintaining our FY15 sales estimates of RM665m vis-à-vis management’s sales target of RM600m as we would expect demand to pick up as HUAYANG continues its launches in 2HCY14. As we gather, HUAYANG’s planned pipeline launches of RM1.1b in FY15 is currently on track with the final phase of One South (GDV: RM185m), Citywoods (GDV: RM216m), Taman Pulai Hijauan (GDV: RM127m), Bandar Universiti Seri Iskandar in Perak (GDV: RM130m) in 2HCY14, while its initial phase of Puchong West (GDV: RM300m) would be launched in 1QCY15. Hence, we believe that our FY15 earnings estimates of RM102.9m are highly achievable, being well supported by its unbilled sales of RM756.5m.
GDV replenishments on the way. Management also highlighted that GDV replenishment is highly crucial to the group and has targeted to replenish its current outstanding GDV of RM3.4b by another RM1.6b up to RM5.0b to ensure development continuity for the next 6 - 8 years, especially in Johor. Recall in our previous report, we highlighted that if HUAYANG does drawdown RM125m of its Sukuk program for landbanking activities: (i) the group’s remaining GDV will increase by RM830m to RM4.2b, (ii) net gearing will increase to 0.69x, which is slightly above our comfort ceiling of 0.5-0.6x. If the group draw down the entire RM250m: (i) total GDV will increase by RM1.6b to RM5.0b, (ii) net gearing will also increase from 0.52x to 1x levels (which may raise some concerns). We do expect landbanking news-flow in the next six months based on management’s high commitment. We would rather the group consider a cash-call for sizeable landbanking to lighten its balance sheet.
Upgrading to OUTPERFORM from MARKET PERFORM. Now that we have more clarity on its landbanking timeline, we believe it is apt to build-in potential GDV replenishments into our RNAV. We have assumed that the group will draw down the full RM250m over the next 12 months, which implies a GDV replenishment of RM1.6b, which increases our RNAV from RM2.91 to RM3.52. This implies a higher TP of RM2.60 (RM2.15 previously) based on unchanged RNAV discount of 26%. While we are tempted to reduce or eliminate the RNAV discount given HUAYANG’s popular ‘mass market’ appeal, we are concerned if their net gearing breaches our comfort ceiling level. As it is, our applied RNAV discount is not too far off from its historical low discount rate of 23%. We are comfortable with our valuations as our new TP is supported by 5.1% dividend yield and 6.7x FY15E PER vs. small-mid cap peer average of 4.5% and PER of 8.4x. However, we do not envision further upgrading of TPs at this juncture, unless there is a cash-call or other re-rating factors.
没有评论:
发表评论