DYNAQUEST SDN BHD
Analyst:
2Q2007 RESULTS
Neoh Soon Kean / Kennedy Manikam
Tel: 604-2612011
nsk@dynaquest.com.my
8 February 2007
Price:
HUNZA PROPERTIES BHD
Market Capitalisation:
(HUNZPTY)
Stock Code:
5018
2006
2007F
EPS (sen)
17.08
30.00
P/E (x)
13.11
7.47
Dividend/Share (sen)
5.40
7.30
NTA/Share (RM)
1.66
1.88
1.66
1.88
Issued Capital (m shares)
115.79
115.83
52-weeks Share Price Range
RM1.07 - RM2.25
Book Value/Share (RM)
% Held
Major Shareholders:
Dato' Khor Teng Tong *
Yayasan Bumiputera Pulau Pinang
Koperasi Felda
Note: F – Forecast.
RM259.46 m
Board:
Main Board
Sector:
Properties
Recommendation:
Key Stock Statistics
RM2.24
BUY
Weekly Share Price Chart of Hunza Prop.
2.20
2.00
1.80
1.60
1.40
58.03%
8.04%
5.28%
1.20
1.00
Jan-04
May-04
Sep-04
Jan-05
May-05
Sep-05
Jan-06
May-06
Sep-06
Jan-07
May-07
1. 2Q2007 Result Highlights:
Per Share Data
Book Value (RM)
2004
1.44
2005
1.55
2006
1.66
2007F
1.88
Cash Flow (sen)
25.21
27.53
29.69
48.00
(RM m)
2Q06
1Q07
2Q07
% Change
Y-o-Y Q-o-Q
Earnings (sen)
13.21
14.13
17.08
30.00
Revenue
31.10
36.35
39.28
26.3%
8.0%
5.40
5.40
5.40
7.30
Operating Profit
8.73
10.86
13.33
52.6%
22.8%
-27.2%
-7.4%
Net Dividend (sen)
0.41
0.38
0.32
0.24
Depreciation
0.28
0.22
0.20
16.96
15.85
13.11
7.47
Interest Expenses
0.00
0.01
0.01
P/Cash Flow (x)
8.89
8.14
7.54
4.67
Pre-tax Profit
8.73
10.85
13.33
52.6%
22.8%
P/Book Value (x)
1.55
1.44
1.35
1.19
Net Profit
4.79
7.24
8.41
75.5%
16.2%
Dividend Yield (%)
2.41
2.41
2.41
3.26
29.86
33.94
20.9%
13.7%
ROE (%)
9.15
9.10
10.31
15.92
Operating Margin (%) 28.08
28.07
Pre-tax Margin (%)
29.84
33.92
20.9%
13.7%
43.32
70.59
80.24
85.00
Net-Margin (%)
15.40
19.90
21.40
39.0%
7.5%
Payout Ratio (x)
PER (x)
Net Gearing (%)
Note: F – Forecast.
P&L Analysis (RM m)
2004
2005
2006
2007F
Year-end: June
Revenue
117.30 112.26 116.64 180.00
26.21
31.55
34.12
57.65
Depreciation
1.23
0.78
0.88
0.90
Net Interest Expenses
0.94
1.15
0.02
4.50
Pre-tax Profit
27.02
31.83
34.81
53.15
Effective Tax Rate (%)
29.36
28.89
28.32
29.00
Net Profit
13.81
16.36
19.78
34.74
Operating Margin (%)
22.34
28.10
29.25
32.03
Pre-tax Margin (%)
23.04
28.35
29.84
29.53
Net-Margin (%)
Note: F – Forecast.
11.77
14.58
16.96
19.30
Operating Profit
25.0% -16.7%
Hunza Prop’s financial results for 2Q07 ended 31 Dec 2007
were largely within expectation. The group registered a
52.6% y-o-y rise in PBT to RM13.3 m on the back of a
26.3% y-o-y increase in revenue to RM39.3 m. Q-o-q, the
group’s PBT recorded a 22.8% and 8.0% rise in PBT and
revenue respectively. Underpinned by contributions from its
Alila project in Penang and Phase 4 of Bandar Putra
Bertam, the substantial y-o-y rise in its earnings reflected
the additional contribution from Mutiara Seputeh in Kuala
Lumpur. Mutiara Seputeh was launched in April 2006 while
Alila was officially launched in September 2005.
For 1H07, the group registered a 53.2% y-o-y rise in PBT to
RM24.2 m and a 32.4% y-o-y increase in revenue to
RM75.6 m. The y-o-y improvement in its PBT margins was
mainly due to higher margins derived from its two new
projects and for shop-offices at Bandar Putra Bertam.
Despite a marginal increase in its tax rate (28.96% vs
Page 1 of 2
DYNAQUEST SDN BHD
28.71%), Hunza Prop's net profit rose by a more significant
72.4% y-o-y to RM15.6 m due to the decline in profits
attributable to minority interests. This arises as the Bandar
Putra Bertam project is a 70:30 joint-venture development
with Yayasan Bumiputra Pulau Pinang.
Supported by the good take-up rates for its Alila and Mutiara
Seputeh projects, we expect its financial results in the
second half to continue to improve in tandem with the
heightened pace of construction work on these projects. The
unbilled sales for Alila currently stand at RM83.0 m and
Mutiara Seputeh at RM36.2 m. For the whole of FY07, we
are maintaining our EPS projection of 30.0 sen for the
group. Hunza Prop will be launching its Gurney commercial
project and the seafront Infinity super-condo project soon.
However, their contributions to the group’s results would
only be felt in FY08.
2. Recent Development
Koperasi Felda has emerged as a substantial shareholder of
Hunza Prop following the acquisition of a 5.28% equity stake
on 19 January 2007 via a private placement.
3. Recommendation
Since our BUY recommendation in February 2006, Hunza
Prop’s share price has appreciated by a significant 74%. We
think its share price benefited from the revival of investor
interest in the higher-end property development companies,
particularly after the recent abolishment of FIC’s approval for
property purchases made by foreigners. As it is,
approximately 25% of the sales at Alila and Mutiara Seputeh
are foreign purchases.
While Hunza Prop’s prospective PE multiple has expanded
to 7.3 times in line with its share price, the valuation remains
relatively undemanding more so with the recent
crystallisation of its strong earning prospects as its multiple
high-end projects comes to fruition. As such, we are
maintaining the BUY call on its shares.
Given its stronger earnings phase and manageable gearing
position, higher future dividend payout is expected. Based
on an estimated net dividend of 7.3 sen for CY07, its share
provides a net yield of 3.3%.
The information in this report has been obtained from sources which DYNAQUEST SDN BHD believes to be reliable. We do not
guarantee its accuracy or completeness. Any opinions expressed herein reflect our judgement at this date and are subject to change
without notice. This report is for information only and should not be construed as specific advice to sell or buy the securities referred to
herein. We accept no liability for any direct or indirect loss arising from the use of this document. DYNAQUEST SDN BHD, its
associates, directors, officers and/or employees may have an interest in the securities and/or companies mentioned herein.
Our definitions of stock recommendations/ratings are as follows:- 1. BUY -- The total return from stocks of this category is expected to
outperform the KLCI or the EMAS indices over the next 12 months. We would expect the stocks to provide a positive absolute return
over the same time period. 2. BUY ON WEAKNESS -- While stocks of this category is expected to outperform the KLCI or the EMAS
over the next 12 months; the margin of out-performance is expected to be of smaller magnitude than the first category. In order to
provide a margin of safety, we would recommend the purchase of these stocks at a somewhat lower price level than prevailing currently.
We would expect these stocks to provide a positive absolute return over the next 12 months. 3. HOLD -- The total return from stocks of
this category is expected to be close to the total return provided by the KLCI or EMAS over the next 12 months. The expectation is that
over the long run, this category of stocks is expected to provide a positive total return. 4. SELL ON STRENGTH -- While stocks of this
category is expected to under-perform the KLCI or the EMAS over the next 12 months; the margin of under-performance is expected to
be of smaller magnitude than the last category. Thus, the probability of a positive absolute return from this category of stocks is limited.
Further price rise from the current level would further decrease the probability of a positive absolute return over the next 12 months. 5.
SELL -- The total return from stocks of this category is expected to underperform the KLCI or the EMAS indices over the next 12
months. We believe that the stocks in this category will not be able to provide a positive absolute return over the same time period.
Page 2 of 2