hunza properties berhad : headline net profit skewed by eis - 25/10/2010

8/8/2019 Hunza Properties Berhad : Headline Net Profit Skewed by EIs - 25/10/2010

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25 October 2010

of 3

RHBRI Vs. Consensus

AboveIn Line

Below

Issued Capital (m shares) 194.4

Market Cap (RMm) 293.51

Daily Trading Vol (m shs) 0.5

52wk Price Range (RM) 1.138-1.653

Major Shareholders: (% )

Dato' Khor Teng Tong 53.4

Lembaga Tabung Haji 8.3

Yayasan Bumiputra PulauPinang

7.5

FYE June FY11 FY12 FY13

EPS chg (%) - - -

Var to Cons (%) 9.4 39.3 (5.9)

PE Band Chart

Relative Performance To FBM KLCI

Loong Kok W en, CFA(603) 92802237

[email protected]

Table 1 : Investment Statistics (HUNZPTY ; Code: 5018) Bloomberg: HPB MK

Net Ne t

FYE Turnover Profit # EPS Growth PER C.EPS* P/ CF P/ NTA ROE Gearing GDY

June (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%)

2010 248.7 50.9 26.7 40.3 5.7 - 5.5 0.7 12.4 0.1 5.4

2011F 247.1 52.6 27.6 3.4 5.5 24.7 3.8 0.6 15.7 0.0 3.7

2012F 195.9 39.9 20.9 (24.2) 7.2 16.8 6.9 0.6 7.9 0.1 3.7

2013F 165.5 34.1 17.9 (14.4) 8.4 16.0 7.9 0.5 6.5 0.1 3.7

Main Market Listing / Trustee Stock/Syariah Approved Stock By The SC # Normalised * Consensus Based On IBES Estimates

♦ Slightly below expectations. Hunza’s 1QFY11 estimated core net profit

of RM12.5m (-1.8% yoy; -10.4% qoq) came in slightly below ourexpectation by 6% but in line with consensus estimate. Sequential

turnover fell 12.4%, continued to be underpinned by progressive billings

from the two residential towers of Gurney Paragon. Headline net profit of

RM34.7m, however, was skewed by an exceptional item, mainly made up

of a revaluation surplus amounted to RM22.1m arising from Gurney

Paragon mall, office and a piece of land. As expected, no dividend was

declared in 1QFY11.

♦ Unbilled sales declined to RM82m. As at Sept 2010, unbilled sales

continued to decline to RM82m from RM103m in the previous quarter.

Sales for Hunza’s built-then-sell bungalow project – Mutiara Seputeh has

increased to 43%, vs 34% in 4QFY10. Meanwhile, take-up rate for Gurney

Paragon and Inifiniti improved slightly to 64% and 92%, from 63% and

87% in the last quarter. Currently, Gurney Paragon is roughly 84%completed. Superstructure works are in progress, and both East and West

Tower are up to Level 43. As for Gurney Paragon mall, basement

construction works are still in progress.

♦ Forecast. We incorporate the revaluation gain on our headline net profit

forecast, but normalised net earnings remained unchanged at RM52.6m.

♦ Risks. The risks include: 1) slow down in take-up rate due to potential

negative perception on Gurney Paragon after the stop-work incident; 2)

competition from other developers in Penang; and 3) delays in launches

and approvals.

♦ Investment case. We are keeping our indicative fair value at RM1.58,

based on an unchanged 50% discount to our RNAV per share estimate of

RM3.16. Until we see more new launches in the pipeline and better

prospects of the company, we maintain our Market Perform rating on the

stock (Hunza was downgraded from Trading Buy in our sector report dated

20th Oct 2010).

Corporate High l ig hts

R e su l t s No t e

Hunza P ropertiesHeadline Net Profit Skewed by EIs M

a l a s i a RHB Research

Institute Sdn BhdA member of theRHB Banking GroupCompany No: 233327 -M

25 October 2010

Share Price : RM1.51Fair Value : RM1.58Recom : Market Perform

(Maintained) M

A R K E T

D A T E L I N E

P P

7 7 6 7 / 0 9 / 2 0 1 1 ( 0 2 8 7 3 0 )

Please read important disclosures at the end of this report.

Hunza Properties

FBM KLCI

PER = 10x

PER = 8x

PER = 6x

PER = 4x

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25 October 2010

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Source: Company, RHBRI

Table 2. Hunza Properties Quarterly Results

FYE June (RMm) 1Q10 4Q10 1Q11QoQ(% )

YoY(% )

FY10 FY11 YoY (% ) Comments

Turnover 57.1 73.6 64.5 (12.4) 13.0 57.1 64.5 13.0 Revenue continued to be contributedby progressive billings from the 2residential towers of GurneyParagon.

EBIT 17.3 23.6 38.9 64.6 124.8 17.3 38.9 124.8

Net interest 0.1 (0.2) 0.0 (113.0) (60.8) 0.1 0.0 (60.8)

EI 0.0 0.0 22.1 n.m. n.m. 0.0 22.1 n.m. EI in 1Q11 was due to a revaluationsurplus on Gurney Paragon mall,office and a piece of land.

Pretax profit 17.4 19.7 39.0 97.8 123.9 17.4 39.0 123.9

Taxation (4.6) (5.9) (4.3) (26.3) (5.6) (4.6) (4.3) (5.6)

Minority interest (0.1) 0.1 0.1 (32.9) (146.0) (0.1) 0.1 (146.0)

Net profit 12.7 13.9 34.7 149.2 173.2 12.7 34.7 173.2

Normalised netprofit

12.7 13.9 12.5 (10.4) (1.8) 12.7 12.5 (1.8) Slightly below expectations.

EPS (sen) 8.8 7.4 18.4 149.5 108.7 8.8 18.4 108.7

Net DPS (sen) 0.0 5.6 0.0 0.0 0.0

NTA/share (RM) 2.3 2.2 2.4 2.3 2.4

EBIT margin (%) 30.3 32.1 60.3 30.3 60.3Pretax margin (%) 30.5 26.7 60.4 30.5 60.4

Tax rate (%) 26.3 29.7 11.1 26.3 11.1

Table 3: RNAV Estimate

Area Book Mkt Value Surplus

Assets (Acres) (RMm) (RMm) (RMm)

For development:

Kedah 585 13.78 10.2 (3.6)

Penang Island 11.4 109.18 130.2 21.0

Penang - Seberang Prai 701 18.84 207.6 188.8

Klang Valley 22 34.41 76.7 42.3

Total 1,319.4 176.2 424.7 248.5

For investment:

Penang - Seberang Perai 43.87 22.5 9.6 (12.9)

Grand total 1,363.3 198.71 434.3 235.5

Shareholder fund as at June 2010 411.2Total RNAV 646.7

Proceeds from outstanding warrants(new)

49.7

Proceeds from rights issue 49.7

Fully diluted share capital 236.0

FD RNAV per share (RM) 3.16

Table 4. Earnings Forecasts

FYE June (RMm) FY10a F Y11F FY12F FY13F

Revenue 248.7 247.1 195.9 165.5

Operating profit 70.0 93.8 54.8 47.2

Interest expenses (0.9) (1.6) (1.8) (1.7)

PBT 69.1 92.2 53.1 45.4

Tax (18.3) (17.5) (13.3) (11.4)

Net profit 50.9 52.6 39.9 34.1

EPS (sen) 26.7 27.6 20.9 17.9

DPS (sen) 8.1 5.6 5.6 5.6

Source: Company data, RHBRI estimates

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25 October 2010

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IMP ORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. Theopinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ orbe contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to beconstrued as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in anymanner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated personsmay from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectivesof persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluateparticular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment orstrategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents acceptsany liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providinginvestment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHBGroup may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equitysecurities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or otherservices from the companies in which the securities have been d iscussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflectinformation known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation basedupon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or moreover a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take onhigher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommendedsecurities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for theactions of third parties in this respect.

A comprehensive range of market research reports by award-winning economists and analysts are exclusivelyavailable for download from w w w . r h b i n v e s t . c o m

hunza properties berhad : headline net profit skewed by eis - 25/10/2010

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