Journey to Wealth

Hunza Properties - Getting better, but still not quite there

kiasutrader
Publish date: Wed, 27 Feb 2013, 09:28 AM

Period  2Q13 / 1H13

Actual vs. Expectations  1H13 core earnings of RM11.6m were above our expectations, accounting for 78% of our estimates. This was due to quicker than expected sales of the already completed Gurney Paragon Condo (GPC) sales (95% take-up) and Bandar Putra Bertam (BPB Phase 3; 77% take-up). In fact, 1H13 sales of RM53m (+3% YoY) are proportionately ahead of our full FY13E sales target of RM83m.

Dividends  None, as expected.

Key Results Highlights  YoY, 1H13 core net profit and revenue fell 19% each on lower property sales and billings given that there are no other major new launches other than its on-going BPB project.

 QoQ, 2Q13 pretax profit dipped 25% to RM7.6m although its topline grew 14% to RM30.7m. EBITDA margins were compressed by 13.1ppt to 29.8% due to higher cost arising from GP Mall commencement and lower development margins from BPB Phase 3.

Outlook    Over FY13, we believe the group will continue to focus on completing its GP Mall works and may hold back sizeable project launches (e.g. Alila 2, Bayan Baru). GP Mall should commence in Jul-13 and we expect the mall to be 75% occupied upon commencement. The mall has attracted the likes of Valiram Group franchising (NST reported that 10 big names like Michael Kors, Swiss Watch Gallery), Padini Concept Stores, TGV Cinemas and more.

 We believe the group will eventually inject the mall into a REIT since retail M-REITs have fared well over the last 5 years; however, the mall will take a minimum of 3 years to mature.

Change to Forecasts    We raise FY13-14E core earnings by 11%-29% on quicker sales of GP Condo and BPB P3.

Unbilled sales of RM16m provide <1 year visibility.

Rating    Maintain UNDERPERFORM
 The stock is trading at trough 0.5x Fwd PBV but upside to our TP is limited at this juncture given declining profit trends and lack of near term sizeable new launches.

Valuation  Maintain TP of RM1.50 on 53%* discount to our FD SoP RNAV of RM3.20.

Risks  Sector risks, including negative policies.

Source: Kenanga
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