CIMB RESEARCH, Jan 28
H1 FY2014 operating profit dropped 26 per cent y-o-y, largely because of lower contributions from development properties.
We expect the weak earnings to persist given that most of its remaining projects remain unsold, with the exception of The Tembusu. We estimate that the unsold projects account for about 30 per cent of its gross asset value (GAV).
Increasing China exposure. In our recent meeting with management, it highlighted its intention to increase its China exposure in light of the weak Singapore residential market. In the last quarter, Wing Tai (WT) was awarded a tender for a 8,593.9-square-metre site in the Shanghai Huangpu District for 1.1 billion yuan (S$232 million). This works out to 42,821 yuan psm, which is higher than the 37,264 yuan psm paid by Sun Hung Kai for a commercial site in Xujiahui and the 40,106 yuan psm paid by the K Wah Group for a residential site in Pudong.
We believe that the price is on the high side as data from Savills Research showed that Q3 2013 strata-titled and en-bloc offices in the Pudong district transacted at an average of 61,094 yuan psm and 7,430 yuan psm, respectively.
We maintain a "hold" rating. WT is not without its problems given its high-end Singapore exposure and cost pressures. However, its shares trade at a historically low 0.49x FY2014 P/BV and its balance sheet is strong at about 9 per cent net gearing. We maintain our "hold" rating and will revisit the stock on stronger-than-expected sales.
HOLD
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