DYNAQUEST SDN BHD
Analyst:
INITIATING COVERAGE
Kennedy Manikam
Tel: 604-2612011
kmanikam@dynaquest.com.my
15 April 2005
Price:
HUNZA PROPERTIES BHD
Market Capitalisation:
(HUNZPTY)
Stock Code:
5018
2004
2005F
EPS (sen)
13.21
15.00
P/E (x)
10.60
9.33
Dividend/Share (sen)
5.40
NTA/Share (RM)
1.41
Book Value/Share (x)
1.46
Issued Capital (m shares)
105.71
52-weeks Share Price Range
RM1.34 - RM1.71
Major Shareholders:
% Held
Dato' Khor Teng Tong
54.94%
2002
2003
2004
Book Value (RM)
1.00
1.08
1.44
1.46
Cash Flow (sen)
21.21
41.64
25.21
35.00
Earnings (sen)
7.36
11.64
13.21
15.00
Dividend (sen)
3.41
3.41
5.40
5.40
Payout Ratio
0.46
0.29
0.41
0.36
19.03
12.02
10.60
9.33
6.60
3.36
5.55
4.00
P/Cash Flow (x)
2005F
P/Book Value (x)
1.39
1.30
0.97
0.96
Dividend Yield (%)
2.44
2.44
3.86
3.86
ROE (%)
Net Gearing (%)
P&L Analysis (RM m)
7.31
10.81
9.15
10.30
36.79
59.52
43.32
50.30
2002
2003
2004
2005F
Year-end: Jun
Revenue
56.30 112.53 117.30 130.00
Operating Profit
11.57
22.97
26.64
35.10
Depreciation
0.72
0.58
1.23
1.40
Interest Expenses
0.26
0.99
0.94
1.00
Pre-tax Profit
12.31
22.60
27.02
32.70
Effective Tax Rate
27.99
32.89
29.36
28.00
7.02
11.14
13.81
15.50
20.55
20.41
22.71
27.00
Pre-tax Margin
21.86
20.08
23.04
25.15
Net-Margin
12.47
9.90
11.77
11.92
Net Profit
Operating Margin
Main Board
Sector:
Properties
HOLD
1. Investment Highlights/Summary:
Hunza Prop’s earnings is currently driven by its two major
ongoing projects (Bayu and Bandar Putra Bertam). With the
additional contributions from its new higher-end projects
flowing in with effect from FY06, the group is poised to
register substantially higher earnings. At the current price of
RM1.40, Hunza Prop is trading at an undemanding PE
multiple of 9.3 times for FY6/05 and 7.4 times for FY6/06. In
addition, its shares are supported by nett dividend yield of
3.9% and RNAV of RM2.60.
The group’s upcoming new projects are:-
Per Share Data
PER (x)
RM147.99m
Board:
Recommendation:
Key Stock Statistics
RM1.40
(1) Mutiara Seputeh
A gated project located on a 15-acre site in Seputeh, Kuala
Lumpur. The project is expected to be launched by 1H
2005 and would comprise 86 three-storey semi-detached
houses priced from RM1.6 m to RM1.9 m and 12
bungalows from RM2.2 m to RM2.5 m. The RM200.0 m
project is scheduled for completion two years after its
launch ;
(2) Alila
Another gated project located off Jalan Lembah Permai in
Penang. The 18 acre development would consist of 426
exclusive homes (256 condominium units in the two block
Alila Horizons, 162 Garden Villas and eight bungalows).
The RM200.0 m project is scheduled for completion two
years after its launch in this year ;
(3) Gurney
The project on a 10.2 acre land in Gurney Drive, Penang
has a gross development value of RM650.0 m and is
expected to be launched in 1Q 2006. The group plans to
build its corporate office as well as an apartment suite
called The Gurney of Tomorrow; and
(4) Tanjung Bungah II
The 3-acre project in Tanjung Bungah, Penang has the tagline of Seafront Bungalows in the Sky and will have two
twin towers of 29 to 30 levels each with a sky lounge in the
centre. Only two units per floor. Each unit of 3,500 to 4,500
sq ft size will have its own private lift. The RM110.0 m
project is a very exclusive low-density development. The
project is scheduled for launch in October this year.
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DYNAQUEST SDN BHD
3. Valuation:
2. Background:
Corporate Profile
Making its listed debut on the local bourse on 23.3.00,
Hunza Properties is an established developer of high rise
residential units of low to high cost apartment/condominium
blocks in the northern region. The major projects it had
completed included Greenlane Heights and Marina Bay on
the Penang Island, and Sungai Baong in Seberang Prai. Its
secondary activities include property investment and
trading of building materials.
Hunza Prop, currently, has two major ongoing projects
which are expected to drive its earnings in the near term.
The first is the 585-acre Bayu development project in
Sungai Petani. The second is a 70:30 joint-venture
development with Yayasan Bumiputra Pulau Pinang for a
township called Bandar Putra Bertam (BPB), which was
launched in 4Q02. BPB spans over 701 acres of the land in
Bertam, Kepala Batas, Seberang Prai Utara.
When the remaining undeveloped land in Sungai Petani
(393 acres) and Bertam land (490 acres) is excluded,
Hunza Prop’s undeveloped land bank is small totalling
approximately 43 acres (as at 31.12.04). Nevertheless,
these land are located in strategic prime locations and,
hence, have high development potential.
For comparative valuation, three better quality second-tier
listed property developers have been chosen. As seen in
the table, Hunza Prop’s current share price valuation is not
the most attractive in terms of PE multiple and P/NTA
although it is cheap relative to the overall stock market. The
low valuation for these property developers partially reflects
the present investor sentiments for the property sector.
Comparative Valuation
Share Price (RM) @ 15/4
Mkt. Cap (RM m)
Avg. Daily Vol. (m)
ACTIVITIES
%
HELD
Hunza Holdings
Investment holding
100.0
- do -
100.0
Property construction & rental of
properties, plant & machinery
100.0
Hunza Trading
Trading of building materials
100.0
Hunza Prop
(North)
Property development
100.0
Hunza Parade Dev
- do -
92.5
Bandar Kepala
Batas
- do -
70.0
Perda Hunza
- do -
40.8
TURNOVER
PBT
2003
2004
2003
2004
1.2
0.9
6.4
16.5
4.1
3.0
0.1
0.2
Property
development
94.0
97.1
20.6
25.2
Trading
13.2
16.2
0.7
0.9
-
-
-5.1
-15.8
112.5
117.3
22.6
27.0
Total:
0.05
0.19
0.04
0.02
10.60
10.72
5.06
3.65
P/E FY04 (x)
9.33
8.72
5.00
4.57
P/NTA
0.99
0.46
0.61
0.44
Yield
3.86
4.59
3.60
2.81
Share Price Chart of Hunza Prop. Asas Dunia, Hua
Yang & Plenitude.
RM
1.70
1.50
1.30
0.90
0.70
Mar-04
May-04
HUNZPTY
Jul-04
Sep-04
ASAS
Nov-04
HUAYANG
Jan-05
Mar-05
PLENITU
For 1H05 ended 31.12.04, Hunza Properties registered a
substantial 50.6% y-o-y rise in net profit to RM6.9 m on the
back of a 29.9% y-o-y increase in revenue to RM58.2 m.
The strong improvement in its financial results was mainly
due to the higher profit contribution from its Bandar Putra
Bertam Phase 2A project.
Construction
Elimination
1.28
172.80
4. Earnings Outlook:
Business
Investment
holdings
1.00
90.00
1.10
Masuka Bina
(RM ‘m)
0.79
147.99 150.40
1.90
SUBS/ASSOC
Hunza Usaha
Ventures
1.40
Hua Plenitude
Yang
P/E FY03 (x)
2.10
Corporate Structure
Hunza Asas
Prop Dunia
With contributions kicking in from its Bandar Putra Bertam
Phase 2B and 4A as well as Taman Seri Bayu II A, the
group is set to post higher earnings in 2H05. As such, we
are projecting its EPS at a higher 15.0 sen for FY6/05.
Over the next two years, Hunza Prop’s earnings outlook is
positive underpinned by the launches of four new higherend projects in strategic locations in Penang and Kuala
Lumpur.
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DYNAQUEST SDN BHD
5. Recent Developments:
Hunza Prop has proposed to undertake a proposed private
placement of up to 10% of its issued and paid-up share
capital at an issue price of RM1.37 per placement share.
6. Investment Risk:
Being in a cyclical sector such as property development,
Hunza Prop's prospect is highly dependent on the state of
the economy particularly in the states where its projects are
located. As the economy is currently chugging along nicely
and is expected to continue doing so over the next 12
months, we think the group’s performance would be
satisfactory despite the increased competition and higher
costs of raw materials. However, the current shortage of
labour in the property development sector, following the
deportation of illegal workers, may affect the launching
dates of its projects.
7. Balance Sheet:
Balance Sheet and Other
Financial Data (RM m)
FY2002
FY2003
FY2004
Total Assets
218.1
247.7
311.6
Fixed Assets
23.4
22.5
23.1
Current Asset
194.7
221.2
274.6
LT Assets
23.4
26.5
37.1
Current Liabilities
75.5
67.4
40.3
LT Liabilities
29.3
57.3
105.6
Share Capital
60.4
60.5
104.5
Shareholders Funds
96.1
103.1
151.0
In early 2004, Hunza Prop issued 41.77 m free warrants in
relation to its two-call rights issue of 41.77 m shares at
RM1.00 (cash call of RM0.85 and RM0.15 non-cash) with
free warrants on the basis of 2 shares plus 2 warrants for
every 3 existing shares.
The exercise price of the warrants is at RM1.50 and its
maturity date is 10 March 2009. Based on the BlackScholes Model using a risk-free rate of 6%, the fair value of
its warrant is RM0.43. Its warrant is currently trading at
RM0.25.
8. Recommendation:
Trading at an undemanding PE multiple of 9.3 times for
FY6/05 and 7.4 times for FY6/06, low P/RNAV of 0.5 times,
and backed with a decent nett dividend yield of 3.9%,
Hunza Prop's share price is undervalued. However, we are
inclined to rate its share a HOLD at the present time due to
the current market environment when investors' appetite
particularly for the smaller-sized property development
companies are lacking. We may upgrade our
recommendation should investors' interests in the sector
return and/or Hunza Prop's forward PE multiple contracts
as a result of earnings that sharply exceed our forecast
and/or share price weakness.
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.
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