CIMB Securities 2015-08-13: Wing Tai Holdings - 4Q15 Results; A long wait. Maintain NEUTRAL.

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WING TAI HLDGS LTD W05.SI

A long wait 

• Wingtai’s FY6/15 core net profit was below at 51% of our and 36% of consensus estimates, on weaker development earnings and lower overseas contributions. 
• We think that Wingtai could remain range-bound as weak earnings cap capital appreciation, while a strong balance sheet of 0.1x and cheap valuation of a 42% discount to RNAV limit downside risks. 
• Investors are essentially being paid a dividend of 1-2% as they wait for a turnaround in the stock. 
• We maintain our Hold rating with lower RNAV-based target price (S$2.05) and core EPS as we push back development earnings. 

Weak set of results 

• Wingtai’s FY15 core net profit of S$30m was below at 51% of our and 36% of consensus estimates, on weaker development earnings and lower overseas contributions. 
• Development properties EBIT was down 47% yoy, coming largely from The Tembusu, Le Nouvel Ardmore, Foresque Residences and Helios Residences in Singapore and The Lakeview in China. 
• For the full-year, Wingtai sold 436 residential units valued at S$417m, down from last year’s 565 units valued at S$618m. 
• Investment properties EBIT grew by 6% yoy, with improved occupancy across both its commercial properties and serviced residences. 
• Retail contributed S$1.9m of EBIT for the full-year (vs. S$6.9m last year). 
• A 3 Scts dividend was declared, translating into 1.6% yield. 

Subdued outlook on all front 

• Management expects the environment to remain challenging for the residential sector and prefers to be conservative in terms of land banking. 
• The key markets of Singapore, Malaysia and China have varying issues and management deems its existing land bank in these countries to be sufficient for the next few years. 
• Despite Uniqlo’s good performance, management has highlighted that the general retail segment continues to be challenging and plans to consolidate non-performing stores in the coming year. 
• Investment properties are likely to remain resilient, but contribute only 30-40% of Wingtai’s EBIT (ex-reval). 

Strong balance sheet and cheap valuation the saving grace 

• A strong balance sheet of 0.1x (vs. peers’ 0.37x) and cheap valuation of 42% discount to RNAV could support its share price. 
• However, the subdued outlook in all its core segments is likely to limit room for growth in its share price. 
• We maintain our Hold rating on the lack of re-rating catalysts.

TAN Xuan CFA | LOCK Mun Yee | PANG Ti Wee | http://research.itradecimb.com/ CIMB Securities 2015-08-13

HOLD Maintain HOLD 2.05 Down 2.11