Hua  Yang  announced  the  acquisition  of  two  land  parcels  in  Bukit Mertajam for a total consideration of MYR31m.  Maintain NEUTRAL with a revised TP of MYR2.37 (8% upside). The mixed development project is expected  to  have  total  GDV  of  MYR314m.  We  believe  this  is  a  decentacquisition, given that it is located within the matured Bukit Mertajam town centre.

Announces  two  land  acquisitions  in  Bukit  Mertajam.  Hua  Yang announced  the  acquisition  of  two  land  parcels  in  Bukit  Mertajam measuring a total area of about eight  acres  (4.9 acres + 3.1 acres)  for  a total consideration of MYR31m. This translates into land costs of MYR66psf  and  MYR103  psf  for  the  two  land  parcels  respectively.  The  land parcels  are located approximately 0.5km away from the Bukit Mertajam town centre. They have been earmarked for the development of serviced apartments,  commercial shoplots as well as a condominium block. Total estimated GDV for the development is about MYR313.5m. Based on ourchannel  checks,  we  note  that  land  transactions  in  Bukit  Mertajam  are typically below MYR100  psf, but Hua Yang’s land could possibly have a different fronting, and hence the higher acquisition price. We believe Hua Yang  will  draw  down  some  of  its  MYR250m  sukuk  facility  to  fund  this acquisition.

Decent acquisition.  The acquisition of these land parcels is  in line with Hua  Yang’s  target  to  break  into  new  markets.  Furthermore,  given  that the area is  already  relatively matured, we believe that there  should  be demand for  Hua Yang’s  affordable development.  We expect  Hua Yang to price its products at below MYR500,000/unit for this development.

Earnings forecasts.  We make no changes to our forecasts for now as we expect earnings to come in after FY17.

Maintain  NEUTRAL.  Our  TP  is  now  revised  higher  to  MYR2.37  (from MYR2.28) after factoring in the GDV contribution from the acquisitions. As we  believe Hua Yang is fairly-valued  at current prices,  we  maintain our NEUTRAL call on the stock.

Source: RHB