HuaYang ... Jul11

WILSON & YORK Research:-

RESULTS REPORT
YTD 1Q FY 12 revenue grew more than 65% year on year, whilst net profits grew more than 134% over the same period. Net margins expanded from 13.1% in 1Q FY11 to 18.7% in 1Q FY12 on the back of better selling prices and lower effective tax rates.
Hua Yang Bhd's land bank buildup of the past few years continues to pay off. Take up rates have been good and both revenue and net profits are set to grow strongly in the quarters ahead.

INVESTMENT RISKS
Risks to our recommendation and target price include: i) increases in the general level of interest rates, ii) possible restrictions on mortgage lending or other related disincentives to property development that are currently being seen in other countries around the region, and iii) a sharp slowdown in the general level of economic activity in Malaysia or among its major trading partners: Singapore, China and the US.

RECOMMENDATION
We maintain our BUY recommendation on Hua Yang Bhd (“HYB”) with a fair value estimate of MYR 2.28. Value investors will be attracted by the combination of solid earnings growth and profitability at earnings multiples well below the company's peers. Looking ahead, average ROE is heading to levels of 13-15%, nearly double the average seen over the period 2006-2009, whilst P-BV remains below 0.8x.
Compared to its peers, HYB offers a higher ROE at lower multiples. See page two of this report for more details. Other heavyweights in the sector trade on 2-3x P-BV, while the average P-BV for the sector is 1.3x. Hua Yang Bhd offers investors an attractive combination of very good growth rates at current year multiples less than 0.8x P-BV and 5x P-E. More importantly, the affordable housing sector that HYB is focused on is far less saturated than the high end segment that so many other listed companies are chasing.