Hua Yang announced that it is acquiring new landbank in Selayang. The total  estimated  GDV  for  the  mixed  development  project  is  MYR800m.Given its decent future upside potential, we  upgrade Hua Yang to BUY (from Neutral), with  a revised TP of MYR2.52 (17.2% upside).  Due to  the relatively  mature  surrounding  area,  we  believe  that  there  should  be demand for Hua Yang’s affordable development.

Buying new landbank in Selayang.  Hua Yang announced that it has signed  a  conditional  SPA  to  acquire  an  8.09-acre  land  parcel  in Selayang  for  a  total  consideration  of  MYR120m.  This  translates  into  a land  cost  of  MYR340.51  psf,  which  is  decent  given  that  it   has  an approved plot ratio of five. The management expects the land to have an estimated  GDV  of  MYR800m  and  will  consist  of  serviced  apartments with retail lots.  The land is located along  the Middle Ring Road 2 near the  Selayang  Wholesale  Market  and  is  situated  in  a  relatively  maturearea.  Similar  to  its  other  recent  acquisitions  in  Bukit  Mertajam,  we believe  that  Hua  Yang  will  draw  down  some  of  its  MYR250m  sukuk facility to fund this acquisition.

Positive  on  the  acquisition.  We  expect  this  acquisition  to  further cement  Hua  Yang’s  position  in  th  Klang  Valley.  Including  this acquisition,  more  than  60%  of  its  available  GDV  of  MYR3.9bn  will  be contributed by  its Klang Valley projects.  Furthermore, given the maturearea and  ready access to Petaling Jaya and Kuala Lumpur via several nearby  highways,  we  believe  that  there  should  be  demand  for  Hua Yang’s affordable development. We expect Hua Yang to price most of itsproducts at below MYR500,000/unit for this development.

Earnings forecasts.  No changes to our  earnings  forecasts for now as we expect earnings to come in after FY17 (Mar).

Upgrade to BUY. We upgrade Hua Yang to BUY, with a revised RNAVbased  TP  of  MYR2.52  (from  MYR2.37)  after  we  factor  in  the  GDV contribution  from  this  acquisition.  Hua  Yang’s  multiple  acquisitions  in recent weeks  have  strengthened  its commitment in  replenishing its GDV for future growth,  thus we  upgrade  the stock to BUY (from Neutral) due to the decent upside potential going forward.

Source: RHB