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Thursday, October 22, 2015

Huayang: Earnings dipped sequentially

Results Update

For QE30/9/2015, Huayang's net profit dropped 4% q-o-q but rose 10% y-o-y to RM29 million while revenue improved 6% q-o-q or 8% y-o-y to RM151 million. The y-o-y improvement in revenue & PBT (of 9%) were attributed to steady construction progress of all on-going projects.


Table: Huayang's last 8 quarterly results


Chart 1: Huayang's last 29 quarterly results 

We can see from the chart below that Huayang's unbilled sales was at a high of 5.6 quarters in 2Q2013. With better delivery/execution, this ratio of unbilled sales to current quarter revenue recognized started to ease back in 2@2014, despite higher unbilled sales. However, the improved delivery/execution coupled with slowing sales in 2Q2015 led to a drop in the ratio of unbilled sales to current quarter revenue recognized to 4.05. This means that Huayang's sales in hand should last about 1 year.

 
Chart 2: Huayang's last 5 years of 2Q's sales book 

Valuation

Huayang (at RM1.81 yesterday) is trading at a PE of 4.0 times (based on last 4 quarters' EPS of 45 sen). At this PE, Huayang is still deemed fairly attractive.

Technical Outlook

The monthly chart shows that Huayang has broken below its uptrend line, SS. It is now moving sideways, with support at the horizontal line RM1.75 & resistance at the horizontal line RM2.50.

Chart 2: Huayang's monthly chart as at Oct 21, 2015 (Source: ShareInvestor.com)

Conclusion

Despite the mildly negative technical outlook, Huayang is still a good stock for long-term investment based on attractive valuation & satisfactory financial performance. 

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.

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