Hua Yang’s 1QFY16 (Mar) results were in line with expectations. Maintain BUY with a lower TP of MYR2.16 (14% upside), as its P/E valuation is undemanding. Due to the lack of new launches amidst weak market sentiment, 1QFY16 sales were weak at only MYR82m, making up only 16.4% of management’s MYR500m full-year sales target. We cut our FY16F-18F earnings by 2-7%, in view of the earnings risk.

Within expectations. Hua Yang’s 1QFY16 results were within our and market expectations. Earnings during the quarter were mainly contributed by progress billings from existing projects such as BandarUniversiti Seri Iskandar, One South, Metia Residences and Sentrio Suites. As expected, no dividend was declared for the quarter.Property sales outlook remained weak. In line with its industry peers, Hua Yang did not launch any new projects in 1H15, given the weak market confidence before and after the implementation of the goods and services tax (GST). As a result, its new property sales in 1QFY16 were only MYR82m, or 16.4% of its full-year target of MYR500m. Going into 3Q15, management still expects challenges as the concerns over theweak economic outlook and issues surrounding a GLC may take time to ease. Hence, it is not likely to roll out any new project in Jul-Sep.Forecasts. We cut our FY16-18 earnings forecasts by 2/7/6% as sentiment has deteriorated in 3Q15. 1QFY16 unbilled sales of MYR661m also fell below the MYR700m mark (down from MYR701.8m in 4QFY15).

Maintain BUY. After the recent equity market rout and weakening of the MYR, we believe that investor sentiment on the property sector could be more negatively affected. As we expect a longer recovery period and given the recent termination of the Selayang land deal, we lower our TPfor the stock to MYR2.16 (from MYR2.52) based on a larger 30% (from 25%) discount to RNAV. Although there is still no re-rating catalyst for the property sector over the next three months, we continue to rate Hua Yang with a BUY, given its undemanding valuation of 4.5x FY16 P/E.