Wing Tai Holdings

Kim Eng on 5 Feb 2013

Strong first-half showing. Wing Tai reported a 1HFY Jun13 PATMI of SGD160.7m, coming in at 99% and 97% of our and consensus full-year estimates respectively, far-exceeding expectations. While we do not expect the performance to be replicated in the second half, it was still a creditable showing, with current valuations remaining very attractive. Reiterate BUY.

Contributions from Hong Kong and completed projects. Much of the 1HFY Jun13 outperformance came on the back of higher-thanexpected contributions from its Hong Kong-listed associate. In addition, profits from units sold at the already-completed Belle Vue Residences and Helios Residences also flowed straight to the bottom-line.Progressive profit recognition from the substantially-sold Foresque Residences and L’VIV are expected to underpin earnings in 2H. Launches possible in 2H CY13. On the back of the latest round of cooling measures, management will continue to monitor the market for appropriate windows of opportunity for new launches. We expect the redevelopment of its old corporate HQ at Tampines Road, now known as The Tembusu, to be launched in mid-2013, while the Prince Charles Crescent site could be launched in 2H CY13.

Maintaining financial discipline. Wing Tai’s balance sheet remains strong, with net gearing marginally reduced to 0.16x and just under SGD1b in cash. We like that management has not overextended the balance sheet, providing it with ample ammunition should more attractive acquisition opportunities arise. Potentially, there is also scope to expand in China, where it currently has two projects in the pipeline, namely Guangzhou Knowledge City and in Luodian, Shanghai.

Undeserving of its steep discount. Despite its 59% rise in the past one year, Wing Tai still trades at 0.65x P/B and 0.5x P/RNAV. We believe that the large discounts are unjustified given Wing Tai’s strong balance sheet and its relatively low-cost landbank. Maintain BUY with a target price of SGD2.55, pegged to a 30% discount to RNAV.