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Business Involved …
HuaAn is a producer of metallurgical coke.

It has been listed on the Main Board of Bursa Malaysia for more than 10 years.

Its business is production and sale of metallurgical coke ("Coke"). Coke contributes 79% to the revenue (21% from other by products).

HUAAN business is supported by its 1.8 million tones per annum production plant in Linyi City, Shandong Province, China.

What is Coke? The producer buys coal and process it into COKE. The demand for COKE is from the steel industry as it is an important input in the steelmaking process. The process is called blast furnace.

Financial Highlight

For 3QFY17 ended Sept 2017, it posted a net profit of RM34.147 mil vs. RM10.2m loss last year. EPS is at 3.04sen (vs. negative 0.91 sen in 3QFY16). Reason for the earnings surge is mainly due to better average coke price of RMB2,043 per tonne in 3QFY17 and higher sales volume of 210,000 tonnes.

As at Sept 2017 its cash and short term investment stood at RM22.13 million, total debt stood at RM25.36 million.


In 9M17, HUAAN already make 4.91 sen of EPS. Lets assume a full year FY17 EPS of 6.00 sen (A small 1.09 sen for 4Q17 which should be achievable).

What about FY18? Most conservative scenario = 6.11 sen (assuming only 2% earnings growth in FY18). Bullish scenario = 6.90 sen (assuming 15% earnings growth).

The Company is worth at least 6.75x PE. The 6.75x PE is at 25% discount against ANNJOO and MASTEEL (both trading at historical PE of 9x till 23 Jan 2018/).

Most conservative scenario = 6.25x PE * 6.11 sen = 38 sen

Bullish scenario = 6.25x PE * 6.90 sen = 43 sen.

*Updated chart



Ho Hup is currently (19 June 2014) trading at only 4.2 times implied forward PER, cheaper than that of its peers’ average PER of 7.1 times.

Its property division will recognize a portion of its JV project on a 50 acre tract in 1QFY2014. Nonetheless, due to the timing of approvals for the project’s new plan and design, ti will only start to contribute from 2QFY2014 onwards.

However a shortfall will definitely be made up in 2015.

Ho Hup’s Bukit Jalil City project with Malton Bhd comprises shop offices, serviced apartments, and shopping mall. It will be officially launched by end of 2014. The group is currently (June 2014) revising the design and plan of the project which will result in a higher GDV to rm4.5 billion.

Assuming the project’s GDV is rm4 billion and based on agreement that Ho Hup is entitled to 18% of the GDV, on average estimate that the project will contribute about rm45 million per annum in net profit throughout the 10 years period of development.

Details of the 50 acres development in Bukit Jalil dubbed Pavilion 2 to be co developed by Ho Hup and Malton will be out by third quarter of 2014.

The project will be the growth driver for Ho Hup.

While the 50 acre piece is for the JV with Malton, Ho Hup has actually started development an adjacent 10 acre on its own, with a GDV of rm10 billion.

On its construction arm, the gorup’s order book stood at rm400 million.

The group is looking to replenish its land bank.

It had ventured into property and construction projects in Myanmar.

After rejuvenated, the company is back in business.

Going forward, observers see clarity in Ho Hup’s earnings visibility as the group is on a clean state to expand and focus on its property development business. A healthy balance sheet following its restructuring exercise puts Ho Hup in a favourable position to build a portfolio of development projects for future growth.