1H17 results was below expectations accounting for 39%/40% of our and streets’ full-year estimates. Sales of RM101.2m are behind our and management’s fullyear target of RM409.2m and RM500.0m, respectively. The underperformance is mainly due to lower-thanexpected billings recognition. No dividend is declared, as expected. UNDER REVIEW (previously MP, TP: RM1.37) pending today’s briefing.

A very slow year. NP of RM40.9m for 1H17 was fairly disappointing, accounting for only 39%/40% of our and streets’ full-year estimates. 1H17 sales of RM101.2m are also behind our and management’s target of RM409.2m and RM500.0m, respectively. The disappointment was mainly driven by lower than expected recognition on its billings for on-going projects while disappointment in sales was due to the lack of new launches. No dividend was declared, as expected.

Results highlight. 1H17 NP saw a sharp decline of 30% on the back of the 21% decrease in revenue. The decline in revenue was mainly driven by slower progressive billings registered, coupled with several of its on-going projects already at the tail end of construction cycle. QoQ, 2Q17 earnings decreased by 29% with revenue seeing a decline of 20% due to similar reasons as above. Positively, its net gearing saw further improvement, which came down to 0.40x from 0.50x previously.

Outlook. For FY17, management still aspires to achieve its sales target of RM500.0m driven by planned launches amounting to RM721.0m worth of projects, i.e. Astetica (GDV: RM368.0m), landed residential in Johor (GDV: RM33.0m), BUSI, Perak (GDV: RM100.0m) and Prai, Penang (GDV: RM220.0m). However, we might look to review our sales estimates post the briefing today.

FY17-18E earnings to be reviewed, pending its result briefing. However, we might look to lower our earnings estimates post briefing should we revise our sales estimates downwards. Unbilled sales of RM311.1m provide earnings visibility for another year.

UNDER REVIEW. Currently, we are placing our recommendation and Target Price UNDER REVIEW pending today’s briefing. Previously, we had a MARKET PERFORM call on HUAYANG with a Target Price of RM1.37 based on 48% to its RNAV of RM2.64.

Risks to our call includes: (i) Weaker-than-expected property sales, (ii) Higher-than-expected sales and administrative costs, (iii) Negative real estate policies, (iv) Tighter lending environments, and (v) Higher-than-expected dividend pay-out.

Source: Kenanga Research - 24 Oct 2016