Wing Tai Holdings

CIMB Research on 22 Aug 2012

WHILE Wing Tai Holdings management noted the heightened probability of a correction in the property market, we view the cautious optimism as a positive, ensuring that capital is deployed carefully.

FY13 catalysts come from its new Tampines launch, a revamped Foresque and stronger dividends.

Core earnings for FY12 ended June 30 met our forecast at 103 per cent of full year, but was slightly below consensus by 12 per cent. We introduce FY15 and adjust FY13/14 EPS on recognition timing and new Tampines project.

New project and re-rating of associate/subsidiaries raise our RNAV/target price (25 per cent discount to RNAV).

FY13 will be supported by mid-market projects. A new freehold residential project in Tampines will be launched in early 2013, yielding 337 units.

Positioned in the mid-market segment, this is a key launch, which management will price at a premium given its freehold status and location.

Phase 2 of Foresque will also be launched after a revamped showflat is completed in 6-9 months' time. The remaining two high-end Anderson and Ardmore projects will be completed in 2013.

It has two years to dispose of all units before it faces a penalty.

FY12 earnings were driven by additional units sold for the Helios and Belle Vue projects, as well as progressive recognition (Foresque, L'Viv and Ascentia Sky).

Net gearing fell to a low of 0.18x and cash was returned to shareholders: FY12 saw dividends/share of seven cents, on par with FY11 at a higher 36 per cent payout ratio (core earnings). With FY12 dividend yield at 5 per cent based on the current share price, FY13 is likely to follow suit with 4-5 per cent yields on the back of mid-market launches, strong cash balances and 50th anniversary.

Management expressed greater caution than a year ago and will be careful in deploying capital.

It still sees long-term value in high-end segment. At 0.5x P/BV, we see further value with $1.39 (partial offer price) as a support level.
OUTPERFORM