While Singapore new home sales in July appeared strong, we believe the outlook for the domestic residential space remains fairly muted. This is particularly so for the high-end segment, and sales at Wing Tai’s luxury projects will likely experience continued headwinds going into 2H15, barring a reversal of the ABSD on foreigners. The group’s FY15 PATMI (ending Jun 15) fell 41% to S$150.3m, mainly due to lower YoY contributions from its development segment and a weaker share of profits from Wing Tai Properties Ltd in Hong Kong, which was overall broadly within market expectations. In order to conserve cash and further buttress its balance sheet, Wing Tai reduced its FY15 dividend to 3.0 S-cents from 6.0 S-cents last year. The group’s net gearing ratio also further strengthened to 10% versus 16% as at end of FY14. We believe the group is well-positioned to ride out the current down-cycle and see significant long term value in its shares, now valued at 43% of its book value. Maintain BUY with an unchanged fair value estimate of S$2.58.
Jump in Singapore new home sales in July likely a blip
Recent URA data show that 1,594 new homes were sold in Singapore over July 2015. This is up 212% YoY and brought YTD total sales to 5,027 units – in line with our expectations for 5.5k to 7.5k new home sales in 2015. We note that July sales were mainly driven by a successful launch at High Park Residences by CEL (1169 units sold over the month) which comprises a significant number of smaller units. The median price of the units sold at High Park was also below the key psychological level of S$1k psf, which drew some bargain hunters into the mix.
Continued headwinds for Wing Tai’s luxury projects
While July numbers were strong, we see sales slowing in the months ahead due to the lunar seventh month and the elections, and the outlook for the domestic residential space remains fairly muted. This is particularly so for the high-end segment, and sales at Wing Tai’s luxury projects will likely experience continued headwinds going into 2H15, barring a reversal of the ABSD on foreigners. The group’s FY15 PATMI (ending Jun 15) fell 41% to S$150.3m, mainly due to lower YoY contributions from its development segment and a weaker share of profits from Wing Tai Properties Ltd in Hong Kong, which was overall broadly within market expectations.
Lowered dividends to buttress balance sheet
In order to conserve cash and further buttress its balance sheet, Wing Tai reduced its FY15 dividend to 3.0 S-cents from 6.0 S-cents last year. The group’s net gearing ratio also further strengthened to 10% versus 16% as at end of FY14. We believe the group is well-positioned to ride out the current down-cycle and see significant long term value in its shares, now valued at 43% of its book value. Maintain BUYwith an unchanged fair value estimate of S$2.58.
Recent URA data show that 1,594 new homes were sold in Singapore over July 2015. This is up 212% YoY and brought YTD total sales to 5,027 units – in line with our expectations for 5.5k to 7.5k new home sales in 2015. We note that July sales were mainly driven by a successful launch at High Park Residences by CEL (1169 units sold over the month) which comprises a significant number of smaller units. The median price of the units sold at High Park was also below the key psychological level of S$1k psf, which drew some bargain hunters into the mix.
Continued headwinds for Wing Tai’s luxury projects
While July numbers were strong, we see sales slowing in the months ahead due to the lunar seventh month and the elections, and the outlook for the domestic residential space remains fairly muted. This is particularly so for the high-end segment, and sales at Wing Tai’s luxury projects will likely experience continued headwinds going into 2H15, barring a reversal of the ABSD on foreigners. The group’s FY15 PATMI (ending Jun 15) fell 41% to S$150.3m, mainly due to lower YoY contributions from its development segment and a weaker share of profits from Wing Tai Properties Ltd in Hong Kong, which was overall broadly within market expectations.
Lowered dividends to buttress balance sheet
In order to conserve cash and further buttress its balance sheet, Wing Tai reduced its FY15 dividend to 3.0 S-cents from 6.0 S-cents last year. The group’s net gearing ratio also further strengthened to 10% versus 16% as at end of FY14. We believe the group is well-positioned to ride out the current down-cycle and see significant long term value in its shares, now valued at 43% of its book value. Maintain BUYwith an unchanged fair value estimate of S$2.58.
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