Hua Yang terminated Penang land buy, still loves Penang

Many years ago, I heard a story from an agent friend that the land prices in Penang increased suddenly when the KL based developers started to focus on Penang. The prices offered by Penang based developers and KL based developers showed such a huge gulf that suddenly many developers woke up and quickly try to secure more lands before even more ‘invasion’ from these land hungry KL developers. I think due to the size of the lands, China based developers still do not see Penang as big enough for them compared to Iskandar or KL. For many mid-tier developers, Penang represents an opportunity for future growth. One of the developer is Hua Yang.

It has recently announced that it has aborted a land deal to acquire two parcels of freehold land in Bukit Mertajam, Penang measuring 3.14 acres. This is the second deal that they are terminating after an earlier termination of a piece of 8.09 acres in Selayang. Read here: I lost a Selayang opportunity by Hua Yang In case some readers are wondering why I try to follow Hua Yang, well, a few years ago, two of their marketing managers told me this, ‘the management wants marketing department to use ONLINE instead of print media. They believe it’s better and more cost efficient too.’ That’s when I follow news from Hua Yang. I think their management have a good foresight OR they are just trying to manage costs. Haha. Both ways are fine.

According to StarBizWeek, Hua Yang’s chief executive officer Ho Wen Yan (pic) said, “Our current landbank stands at 468 acres with an estimated gross development value (GDV) of RM3.36bil. Any potential acquisitions must meet the criteria set by the company and must be able to deliver tangible value to our shareholders in a long-term and sustainable manner.” Kenanga Research said that Hua Yang’s management has indicated that Penang mainland is one of its preferred choices. It expects Hua Yang’s gearing to stay at 0.6 times levels in FY16 as Hua Yang looks for another piece of land similar to the aborted Selayang land deal. Most of Hua Yang’s remaining landbank was in Puchong West, Selangor and Bandar Universiti Seri Iskandar, Perak.The remaining GDVs are RM1.35bil and RM850.5mil respectively.

Based on the latest numbers, Hua Yang is one of the cheapest property developer stocks on the Bursa Malaysia. It is only trading at 4.12 times of FY2015 and this is actually less than half of the valuations forEco WorldDevelopment Group Bhd, at 11.5 times. Gross yield based on current share price is 7.1%. Dear all, this is VERY high though the current slowdown may also affect some of its financial results. Yes, I currently own some Hua Yang stocks which I have bought since beginning of 2015. Hopefully by the end of the next financial year, it can give me some decent dividends to treat my whole family to a seafood dinner. All the best to me and Hua Yang too.

written on 2 Dec 2015

Next suggested article: Hua Yang: Manageable land cost, healthy gross margin

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