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Last updated: December 2018

Young Investors

Case Study March 2013 : Hua Yang Berhad

Established by the late Mr. Ho Mok Heng on the 28th December 1978 as a private limited company under the name of Heng Po Sdn. Bhd., Hua Yang's was listed on the Main Board of Bursa Malaysia on 29 November 2002. Its principal activities consisting of investment holdings, property development, and provision of management services. Their developments are currently located mainly in Klang Valley, Perak, and Johor.

Revenue and Profit

Hua Yang's has recorded steady growth records in both its revenue and profits since its FY2009.

Revenue and Profit
FY Revenue ('000) Revenue Growth Net Profit ('000) Net Profit Growth Net Profit Margin
2009 RM100,043 - RM8,577 - 8.57%
2010 RM103,542 3.5% RM11,477 33.7% 11.08%
2011 RM188,865 82.5% RM25,227 119.1% 13.36%
2012 RM306,412 62.2% RM53,518 112.3% 17.47%
Editor Speaks

Comparing Revenue and Net Profit growth rates, Hua Yang's Net Profits show a higher growth rate, suggesting strong management in its cost and expense control.

Hua Yang's Net Profit Margin have increased steadily, from 8.57% in 2009 to 17.47% in 2012, suggesting good cost control, reducing costs from 91.43% in 2009 to 82.53% in 2012. Healthy cost control measures combined with revenue generating capabilities will generally result in greater profits.

Current Ratio

Current Ratio
Year 2009 2010 2011 2012
Current Assets (RM'000) 95,440 127,150 169,997 202,949
Current Liabilities (RM'000 22,283 69,407 77,656 70,919
Current Ratio 4 2 2 3
Editor Speaks

Hua Yang's has managed to keep its current assets well above its current liabilities, with a current ratio of 2.862. After its investing and financing activities, it has RM25.2 million cash flow remaining. These 2 factors combine to suggest that Hua Yang is well prepared to face most short term challenges, and take on opportunities that come along.

Hua Yang's Current Ratio has been quite stable over the past 4 years, maintaining at between 2 to 4. This suggests that Hua Yang is at lower risk, as Current Assets are greater than Current Liabilities, suggesting its resilience to short term surprises. The Current Ratio of 4 in the year 2009 could be due to it having less short term projects, thus its lower financial leverage.

Editor Looks Further

Dividends

For those concerned about dividend payouts, Hua Yang's dividends have increased over the years, from RM0.03 in 2010, to RM0.075 in 2011, and RM0.15 in 2012.

PE Ratio

Hua Yang's PE Ratio has also grown healthily, from 35.89 in FY2009, 26.68 in FY2010, 12.22 in FY2011, to 5.82 in FY2012. This shows that Hua Yang's earnings are increasing at a higher rate than its share price, and could be seen as an undervalued counter.

Some Good News

The government announced during the recent 2013 Budget that it is targeting to build more affordable homes for the public. This announcement, if followed through, could favor Hua Yang, who is in the affordable homes segment, and is continuing to develop more to meet the increasing demand.

Projects

Early September 2012, Hua Yang completed its Symphony Heights project in Selayang, which is now completely sold out. Its other ongoing projects include One South, Senawang Link, Bandar Universiti Seri Iskandar, Taman Pulai Indah, and Taman Pulai Hijauan, which are worth a total of RM815 million and are aimed to launch in its Financial Year (FY) 2013. Its future projects are located at Shah Alam (worth RM175 million), and Desa Pandan (worth RM160 million). Both projects are in strategic location with good access to highways and public transportation. Future earnings can be expected to grow at a double digit (percentage) if not affected by other factors like the global economic slowdown.

Editor Delves Deeper

Total Debt Ratio and Total Debt to Equity Ratio
Cash Flow
Year 2011 2012
Net Cash Generated from Operating (RM'000) -8,098 54,978
Net Cash Generated from Investing (RM'000) -3,440 -54,185
Net Cash Generated from Financing (RM'000) 15,852 21,797
Cash and Cash Equivalents at End (RM'000) 2,573 25,163

Hua Yang's Total Debt Ratio and Total Debt to Equity Ratio both show the same trend, where they hike slightly from 2009 to 2010, and increase slowly from 2010 to 2012. Although increasing, both are still maintaining at lower than 1. Total Debt Ratio rose from 0.26 times in 2009 to 0.40 times in 2012, while Total Debt to Equity Ratio has risen from 0.35 times in 2009 to 0.66 times in 2012, indicating an increased in financing through debt compared to equity. However, Hua Yang does maintain a relatively lower leverage risk as its Total Debt to Equity Ratio is still lower than 1, suggesting that its capital is sufficient to cover their debts.

Cash Flow

Overall, Cash and Cash Equivalents at End for Hua Yang has increased greatly from RM2,573,000 in 2011 to RM25,163,000 in 2012, implying lower risk due to the availability of higher cash flow.

The increase in Net Cash Generated from Operating suggests excellent management of core business operating profit, operating expenses, and income.

The significant drop in Net Cash Generated from Investing Activities could be affected by Hua Yang's heavy investments in "Land and Development Expenditure".

Net Cash Generated from Financing Activities have increased, due to increased borrowing from banks. This increase in borrowing could be for funding future projects already in planning, and to maintain the cash flow readily available to the company.

By the Young Investors Team