Hua  Yang’s  3QFY15  (Mar)  results  came  in  above  our  expectations.Maintain BUY and RNAV-based TP of MYR2.28  (6% upside),  pending a briefing  today.  Despite  the  softening  market  conditions,  Hua  Yang’s total  new  sales  were  up  35.8%  QoQ,  driven  by  maiden  contributions from  its new launches.  Its strong unbilled sales of MYR733.3m  should help to sustain near-term earnings growth.

Beating  expectations.  Hua  Yang’s  3QFY15  core  profit  of  MYR30.9m (+57.0% YoY, +19.1% QoQ) brought 9MFY15 core  profit to  MYR80.9m (+83.5% YoY),  above our  but within consensus estimates. 9M revenue grew  38.5%  YoY,  underpinned  by  progress  billings  from  its  ongoing township projects such as  Taman Pulai Hijauan,  Bandar Universiti Seri Iskandar (BUSI) and  high-rise  projects such as  One South  (OS),  MetiaResidences (MR) and Sentrio Suites (SS). Gross profit margin continued to improve to 28.2% in 3QFY15 vs 25.6% in 2QFY15. It also declared an interim dividend of 5 sen per share this quarter. 

Still  on  track  to  meet  sales  target.  3QFY15  total  new  sales  of MYR149.8m  were  up  35.8% QoQ (2QFY15:  MYR110.3m), despite  the softening market conditions.  This brought 9MFY15 sales to MYR342.0m (1HFY15:  MYR192.2m),  still  on  track  to  meet  its  MYR500m  full-year target. The new sales growth was attributed to new phases of its existing projects  as  well  as  maiden  contributions  from  Phase  6  of  OS  and Citywoods  in  Johor.  Meanwhile,  its  unbilled  sales  remained  strong  at MYR733.3m  (2QFY15:  MYR717.9m),  with  its  Klang  Valley  projects (namely OS, MR and SS) making up close to 70% of  the unbilled sales amount. Net gearing was stable at 0.5x during the quarter. 

Earnings forecasts.  We are keeping our earnings forecasts unchanged,pending a briefing later today.

Maintain  BUY.  Our  TP  is  maintained  at  MYR2.28,  based  on  an unchanged 25% discount to RNAV, pending today’s briefing. We believe that  despite  the  challenging  outlook  for  the  overall  property  segment, Hua Yang should continue to fare better than some of its peers, given its affordable product offerings. 

Source: RHB