Period 1Q16

However, 1Q16 sales of RM82.0m were lower-thanexpected which only makes up 17% of our full-year estimate of RM482.0m. The lower-than-expected sales were primarily due to the lack of new launches previously coupled with buyers adopting a “wait-andsee” approach due to the implementation of GST.

Dividends

No dividend was proposed in 1Q16 as expected. HUAYANG normally declares dividend in the second half of the year.

Key Results Highlights

YoY, 3M16 core net profit saw an impressive growth of 25% to RM29.9m underpinned by revenue growth of 4% coupled with further expansion in its EBITDA margins by 4.2ppt to 28.5%. Its revenue growth was due to steady contribution from its on-going projects, i.e. One South, Metia Residence, Sentrio Suites and also its township residences, while the improvement in margins was driven by better cost savings and better contribution from Flexis @ One South project, which was just handed over recently.

QoQ, while 1Q16 revenue was down by 6%, HUAYANG was still able to achieve a marginal growth of 1% in its core net profit of RM29.9m, mainly attributable to a lower effective tax rate of 25.6% vis-àvis the significantly higher 30.1% in the previous quarter, while its EBITDA margin was maintained at 28.5%.

Outlook

While the property market remains subdued, we believe that HUAYANG would still be able to maintain its performance as it is well supported by its healthy unbilled sales of RM661.0m, which will provide at least 1-year visibility to the group.

That aside, we expect more landbanking newsflow from HUAYANG in near-to-mid term, hence meeting our landbank replenishment assumptions of RM1.67b in 2015, most likely in the Klang Valley or Johor.

Change to Forecasts

No changes to our FY15-16E earnings and sales estimates as we expect most of its launches to be skewed towards 2H16.

Rating Valuation

Maintain OUTPERFORM

Fundamentally, we reiterate our OUTPERFORM call with an unchanged Target Price of RM2.20 as we still like HUAYANG for its competitive edge in the affordable housing segment. Our TP of RM2.20 is based on 38.0% discount to its RNAV of RM3.52, which is inclusive of RM1.67b worth of GDV replenishment assumptions (of which RM1.3b remains after its Selayang land deal termination).

Its valuation of 4.5x FY16E PER and net dividend yield of 6.9% remains fairly decent compared to its smallcap peers’ 10.4x and 3.5%, respectively.

Risks to Our Call

• Weaker-than-expected property sales.

• Higher-than-expected sales and administrative costs.

• Negative real estate policies.

• Tighter lending environments.