PP 7767/09/2011(028730

)

Malaysia

Corporate Highlights
R e su lts N ot e

25 October 2010 RHB Research Institute Sdn Bhd A member of the RHB Banking Group
Company No: 233327 -M

MARKET DATELINE

25 October 2010 Share Price Fair Value Recom : : : RM1.51 RM1.58 Market Perform (Maintained)

Hunza Properties
Headline Net Profit Skewed by EIs

Table 1 : Investment Statistics (HUNZPTY; Code: 5018) Net FYE June 2010 2011F 2012F 2013F Turnover (RMm) 248.7 247.1 195.9 165.5 Profit # (RMm) 50.9 52.6 39.9 34.1 EPS (sen) 26.7 27.6 20.9 17.9 Growth (%) 40.3 3.4 (24.2) (14.4) PER (x) 5.7 5.5 7.2 8.4 C.EPS* (sen) 24.7 16.8 16.0

Bloomberg: HPB MK

Net P/CF (x)
5.5 3.8 6.9 7.9

P/NTA (x)
0.7 0.6 0.6 0.5

ROE (%)
12.4 15.7 7.9 6.5

Gearing (%)
0.1 0.0 0.1 0.1

GDY (%)
5.4 3.7 3.7 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 our expectation 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).

RHBRI

Vs. Above In Line Below

Consensus

Issued Capital (m shares) Market Cap (RMm) Daily Trading Vol (m shs) 52wk Price Range (RM) Major Shareholders: Dato' Khor Teng Tong Lembaga Tabung Haji Yayasan Bumiputra Pulau Pinang FYE June EPS chg (%) Var to Cons (%) PE Band Chart
PER PER PER PER = = = = 10x 8x 6x 4x

194.4 293.51 0.5 1.138-1.653 (%) 53.4 8.3 7.5

FY11 9.4

FY12 39.3

FY13 (5.9)

♦ ♦

Relative Performance To FBM KLCI
Hunza Properties

FBM KLCI

Please read important disclosures at the end of this report.

Loong Kok Wen, CFA (603) 92802237 loong.kok.wen@rhb.com.my

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25 October 2010

Table 2. Hunza Properties Quarterly Results FYE June (RMm) Turnover 1Q10 57.1 4Q10 73.6 1Q11 64.5 QoQ (%) (12.4) YoY (%) 13.0 FY10 57.1 FY11 64.5 YoY (%) 13.0 Comments Revenue continued to be contributed by progressive billings from the 2 residential towers of Gurney Paragon.

EBIT Net interest EI Pretax profit Taxation Minority interest Net profit Normalised net profit EPS (sen) Net DPS (sen) NTA/share (RM) EBIT margin (%) Pretax margin (%) Tax rate (%) Source: Company, RHBRI Table 3: RNAV Estimate

17.3 0.1 0.0 17.4 (4.6) (0.1) 12.7 12.7 8.8 0.0 2.3 30.3 30.5 26.3

23.6 (0.2) 0.0 19.7 (5.9) 0.1 13.9 13.9 7.4 5.6 2.2 32.1 26.7 29.7

38.9 0.0 22.1 39.0 (4.3) 0.1 34.7 12.5 18.4 0.0 2.4 60.3 60.4 11.1

64.6 (113.0) n.m. 97.8 (26.3) (32.9) 149.2 (10.4) 149.5

124.8 (60.8) n.m. 123.9 (5.6) (146.0) 173.2 (1.8) 108.7

17.3 0.1 0.0 17.4 (4.6) (0.1) 12.7 12.7 8.8 0.0 2.3 30.3 30.5 26.3

38.9 0.0 22.1 39.0 (4.3) 0.1 34.7 12.5 18.4 0.0 2.4 60.3 60.4 11.1

124.8 (60.8) n.m. 123.9 (5.6) (146.0) 173.2 (1.8) 108.7 Slightly below expectations. EI in 1Q11 was due to a revaluation surplus on Gurney Paragon mall, office and a piece of land.

Area Assets For development: Kedah Penang Island Penang - Seberang Prai Klang Valley Total For investment: Penang - Seberang Perai Grand total Shareholder fund as at June 2010 Total RNAV Proceeds from outstanding warrants (new) Proceeds from rights issue Fully diluted share capital FD RNAV per share (RM) 43.87 1,363.3 585 11.4 701 22 1,319.4 (Acres)

Book (RMm)

Mkt Value (RMm)

Surplus (RMm)

13.78 109.18 18.84 34.41 176.2 22.5 198.71

10.2 130.2 207.6 76.7 424.7 9.6 434.3

(3.6) 21.0 188.8 42.3 248.5 (12.9) 235.5 411.2 646.7 49.7 49.7 236.0 3.16

Table 4. Earnings Forecasts FYE June (RMm) FY10a Revenue Operating profit Interest expenses PBT Tax Net profit EPS (sen) DPS (sen) 248.7 70.0 (0.9) 69.1 (18.3) 50.9 26.7 8.1

FY11F 247.1 93.8 (1.6) 92.2 (17.5) 52.6 27.6 5.6

FY12F 195.9 54.8 (1.8) 53.1 (13.3) 39.9 20.9 5.6

FY13F 165.5 47.2 (1.7) 45.4 (11.4) 34.1 17.9 5.6

Source: Company data, RHBRI estimates

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25 October 2010

IMPORTANT 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. The opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be 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 be construed 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 any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may 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 objectives of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts any 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 providing investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB Group 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 equity securities 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 other services from the companies in which the securities have been discussed/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 reflect information 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 based upon 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 more over 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 on higher 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. securities, subject to the duties of confidentiality, will be made available upon request. Additional information on recommended

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 the actions of third parties in this respect.

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