Results Update
For QE30/9/2013, Huayang's net profit remained unchanged at RM16.7 million when compared to the immediate preceding quarter (QE30/6/2013) but declined by 28% y-o-y from RM17.1 million. Revenue also declined by 2% y-o-y but rose 26% q-o-q to RM101 million. The decline in bottom-line y-o-y was due to slower construction progress.
Table: Huayang's last 8 quarterly results
Huaynag's bottom-line continued to slide as did its profit margin. If profitability for a developer that builds for the mass market is heading south, it is a sign that all is not well with the property sector. The competition is getting very stiff in the race to the bottom of the market (or more appropriately, the lower-to-medium-end of the market which Huayang is positioned) .
Chart 1: Huayang's last 21 quarterly results
Valuation
Huayang (at RM2.27 yesterday) is trading at a PE of 9.7 times (based on last 4 quarters' EPS of 23.3 sen). At this PE, Huayang is still deemed fairly valued, with limited upside.
Proposed Bonus Issue
Huayang has just proposed a 1-for-3 bonus issue on October 10. In the past 4 years, Huayang had carried 4 bonus issue. The past 3 bonus issues are 1-for-4 on Oct 11, 2012: 1-for-3 on Oct 25, 2011; and, 1-for-5 on Sep 24, 2010. There is a saying that too much of a good thing may not be good for you.
Technical Outlook
Huayang's uptrend seems to have hit the wall. Its immediate resistance is at the horizontal line at RM2.40 while its immediate support is at RM1.95-2.00.
Chart 2: Huayang's weekly chart as at Oct 23, 2013(Source: quickcharts)
Conclusion
Based on decline in financial performance, a less-than-cheap valuation and neutral-to-cautious technical outlook, I would rate the stock as a SELL INTO STRENGTH.
Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Huayang.
2 comments:
Hi Alex， can ask about your opinion of KSENG3476?
Hi Lisa,
KSeng has gone up so much that it is hard to call a BUY on the stock. It is also equally difficult to call a SELL on something that had succeeded so well. So, I guess it is a HOLD.
So, technically speaking, it is still bullish, albeit in a consolidating mode over the past 3 weeks. In any consolidation, you need to track the stock to be sure that it does not suddenly collapse on you.
Valuation wise, its PE is about 20 times (based on price of RM7.58 & annualized EPS of 38 sen). At that PE, it is easy to be cautious about the stock.
All in all, I am cautiously bullish on it but I won't buy it at this price.
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