Wing Tai - RHB Invest 2015-12-02: Prime Beneficiary Of a High-End Recovery

WING TAI HLDGS LTD W05.SI

Wing Tai (WINGT SP) - Prime Beneficiary Of a High-End Recovery

We like Wing Tai for its diversified earnings base and solid asset backing.
While a slump in high-end residential sales has saddled it with some unsold inventory, exposure is limited and we see the group as a beneficiary of any potential lifting of cooling measures. Its strong balance sheet enables it to deploy capital opportunistically to landbank and begin a new earnings cycle.
Maintain BUY with a SGD2.50 TP (46% upside), based on a 40% discount to its NAV.

Wing Tai has substantially sold most of its high-end residential inventory and has limited exposure in the current cycle. Its remaining unsold projects include Le Nouvel Ardmore and Nouvel 18, which are in the luxury end segment where sales have been slow due to punitive stamp duties imposed on foreign buyers.
Qualifying Certificates (QC) charges would kick in from next year on unsold units, and we believe management is proactively crafting out its sales strategy to move the remaining units.
Due to its low land cost for these projects and its strong balance sheet, we expect limited impact on the group in a worst-case scenario where no more units are sold.
On the other hand, we see the group as a prime beneficiary of any potential lifting of cooling measures given its 60% asset exposure to the residential sector.

While Singapore accounts for the bulk of its asset allocation, the group has a diversified earnings base, with contributions stemming from overseas markets such as Hong Kong, China and Malaysia where it undertakes both commercial and residential developments.
Its investment property portfolio, comprising commercial developments and service apartments, remained resilient and contributed recurring revenue of some SGD38m per annum.

Strong sales and cash generation in recent years have left the group flushed with liquidity.
Wing Tai is currently sitting on SGD900m of cash with net gearing at 0.1x. The group is in a good position to opportunistically replenish its landbank to begin a new earnings cycle.
At current prices, the stock is trading at an unjustifiable 0.4x P/BV despite its solid financials.
Our TP of SGD2.50 is based on a 40% discount to its NAV.

Goh Han Peng RHB Research | http://www.rhbinvest.com.sg/ 2015-12-02

RHB Research SGX Stock Analyst Report BUY Maintain BUY 2.50 Same 2.50