Hua Yang still undervalued despite 66% YTD rise, says TA

by **hlk** Mon 27 May 2013, 17:34

Business & Markets 2013
Written by Kamarul Anwar of theedgemalaysia.com
Monday, 27 May 2013 15:56
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KUALA LUMPUR (May 27): While HUA YANG BHD [] share price has
appreciated by 66% year-to-date, TA Securities told investors to “think
twice if you plan to take profit now”.
In a note today, TA analyst Thiam Chiann Wen said the property
developer is still undervalued among its peers and is likely to have its
net profit to grow in double digits.
Thus, the research house is maintaining its “buy” call on Hua Yang with a
higher target price of RM3.96, from RM2.70 previously.
At 3:21 pm, the property developer’s stock was traded 17 sen or 6.25%
higher at RM2.89. A total of 1.02 million shares changed hands.
In TA’s note, analyst Thiam said Hua Yang’s niche value proposition of
making affordable homes will translate into resilient sales as the
company will benefit from government-friendly policies to promote home
ownerships among first-time buyers.
“We project the group’s revenue to hit the RM500 million mark this
financial year ending March 31, 2014 (FY14), in line with management
expectations. This represents a strong revenue growth of 24%
year-on-year. Our earnings model suggests that the group’s revenue will
swell further to RM639 million by FY15, even without contribution from
its next-to-be flagship project in Puchong. As such, we believe the group
is on track to meet its internal revenue target of RM800 million by
2018,” Thiam said in the note.
Thiam also pointed out that Hua Yang shares are still undervalued among its peers, “despite the outstanding share price
performance (year to date).”
“All in, we believe Hua Yang share price is undervalued on two counts. First, the forward price-earnings ratio (PER) of 5.7
times and 4.5 times based on respective FY14 and FY15 earnings are unjustifiable against the strong earnings growth of
27% to 34% over the next two years.”
Using the next calendar year’s earnings per share, Hua Yang’s shares are trading at 4.8 times when the peer average is at
6.6 times.