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PP 7767/09/2011(028730)

25 October 2010
RHB Research
Corporate Highlights

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

R e su lts N ot e
25 October 2010

Hunza Properties Share Price

Fair Value
Headline Net Profit Skewed by EIs Recom : Market Perform

Table 1 : Investment Statistics (HUNZPTY; Code: 5018) Bloomberg: HPB MK

Net Net
FYE Turnover Profit # EPS Growth PER C.EPS* P/CF P/NTA ROE Gearing GDY
June (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%)
2010 248.7 50.9 26.7 40.3 5.7 - 5.5 0.7 12.4 0.1 5.4
2011F 247.1 52.6 27.6 3.4 5.5 24.7 3.8 0.6 15.7 0.0 3.7
2012F 195.9 39.9 20.9 (24.2) 7.2 16.8 6.9 0.6 7.9 0.1 3.7
2013F 165.5 34.1 17.9 (14.4) 8.4 16.0 7.9 0.5 6.5 0.1 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 RHBRI Vs. Consensus
of RM12.5m (-1.8% yoy; -10.4% qoq) came in slightly below our Above
In Line
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 Issued Capital (m shares) 194.4
RM34.7m, however, was skewed by an exceptional item, mainly made up Market Cap (RMm) 293.51
of a revaluation surplus amounted to RM22.1m arising from Gurney Daily Trading Vol (m shs) 0.5
Paragon mall, office and a piece of land. As expected, no dividend was 52wk Price Range (RM) 1.138-1.653

declared in 1QFY11. Major Shareholders: (%)

Dato' Khor Teng Tong 53.4
♦ Unbilled sales declined to RM82m. As at Sept 2010, unbilled sales Lembaga Tabung Haji 8.3

continued to decline to RM82m from RM103m in the previous quarter. Yayasan Bumiputra Pulau 7.5
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 FYE June FY11 FY12 FY13
Paragon and Inifiniti improved slightly to 64% and 92%, from 63% and EPS chg (%) - - -
Var to Cons (%) 9.4
87% in the last quarter. Currently, Gurney Paragon is roughly 84% 39.3 (5.9)

completed. Superstructure works are in progress, and both East and West PE Band Chart
Tower are up to Level 43. As for Gurney Paragon mall, basement
construction works are still in progress. PER = 10x
PER = 8x
♦ Forecast. We incorporate the revaluation gain on our headline net profit PER = 6x
PER = 4x
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. Relative Performance To FBM KLCI

♦ Investment case. We are keeping our indicative fair value at RM1.58,

Hunza Properties
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).

Loong Kok Wen, CFA

Please read important disclosures at the end of this report.
(603) 92802237

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Table 2. Hunza Properties Quarterly Results

FYE June (RMm) 1Q10 4Q10 1Q11 FY10 FY11 YoY (%) Comments
(%) (%)
Turnover 57.1 73.6 64.5 (12.4) 13.0 57.1 64.5 13.0 Revenue continued to be contributed
by progressive billings from the 2
residential towers of Gurney
EBIT 17.3 23.6 38.9 64.6 124.8 17.3 38.9 124.8
Net interest 0.1 (0.2) 0.0 (113.0) (60.8) 0.1 0.0 (60.8)
EI 0.0 0.0 22.1 n.m. n.m. 0.0 22.1 n.m. EI in 1Q11 was due to a revaluation
surplus on Gurney Paragon mall,
office and a piece of land.
Pretax profit 17.4 19.7 39.0 97.8 123.9 17.4 39.0 123.9
Taxation (4.6) (5.9) (4.3) (26.3) (5.6) (4.6) (4.3) (5.6)
Minority interest (0.1) 0.1 0.1 (32.9) (146.0) (0.1) 0.1 (146.0)
Net profit 12.7 13.9 34.7 149.2 173.2 12.7 34.7 173.2
Normalised net 12.7 13.9 12.5 (10.4) (1.8) 12.7 12.5 (1.8) Slightly below expectations.
EPS (sen) 8.8 7.4 18.4 149.5 108.7 8.8 18.4 108.7
Net DPS (sen) 0.0 5.6 0.0 0.0 0.0
NTA/share (RM) 2.3 2.2 2.4 2.3 2.4
EBIT margin (%) 30.3 32.1 60.3 30.3 60.3
Pretax margin (%) 30.5 26.7 60.4 30.5 60.4
Tax rate (%) 26.3 29.7 11.1 26.3 11.1

Source: Company, RHBRI

Table 3: RNAV Estimate

Area Book Mkt Value Surplus

Assets (Acres) (RMm) (RMm) (RMm)

For development:
Kedah 585 13.78 10.2 (3.6)
Penang Island 11.4 109.18 130.2 21.0
Penang - Seberang Prai 701 18.84 207.6 188.8
Klang Valley 22 34.41 76.7 42.3
Total 1,319.4 176.2 424.7 248.5
For investment:
Penang - Seberang Perai 43.87 22.5 9.6 (12.9)
Grand total 1,363.3 198.71 434.3 235.5

Shareholder fund as at June 2010 411.2

Total RNAV 646.7
Proceeds from outstanding warrants 49.7
Proceeds from rights issue 49.7
Fully diluted share capital 236.0
FD RNAV per share (RM) 3.16

Table 4. Earnings Forecasts

FYE June (RMm) FY10a FY11F FY12F FY13F

Revenue 248.7 247.1 195.9 165.5

Operating profit 70.0 93.8 54.8 47.2
Interest expenses (0.9) (1.6) (1.8) (1.7)
PBT 69.1 92.2 53.1 45.4
Tax (18.3) (17.5) (13.3) (11.4)
Net profit 50.9 52.6 39.9 34.1
EPS (sen) 26.7 27.6 20.9 17.9
DPS (sen) 8.1 5.6 5.6 5.6
Source: Company data, RHBRI estimates

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