WING TAI HLDGS LTD
W05.SI
A Prudent Developer
- Net profit declined by 41% to SGD150m. Lower development profits and wider losses for retail. DPS cut to 3.0 SGD cts to reflect lower profitability.
- NTA increased by 8% to SGD4.07. Well-positioned to replenish land bank with low leverage of 0.1x net gearing.
- Deep value. Maintain BUY with TP lowered to SGD2.25 (from SGD2.37), based on 35% RNAV discount.
DPS cut a disappointment
- FY6/15 net profit declined by 41% to SGD150m with lower development profits and wider losses for its retail segment.
- Profitability improved for its investment properties. It lowered DPS payout to 3.0 SGD cts from 6.0 SGD cts with payout ratio at 48% of net profit (excluding revaluation gains).
- NTA per share increased by 8% to SGD4.07 and net gearing improved to 0.10x due to debt repayment.
- Although the high-end residential market remains challenging, management does not intend to lower prices as it continues to see good value in its projects.
- There is also no need to take impairment charges as market prices are still above cost.
- In view of the challenging retail environment, it will look to rationalise its portfolio of stores.
Ample debt headroom with low leverage
- Given the low balance sheet leverage, we believe the market may be disappointed with its DPS cut.
- However, with its strong balance sheet, it will be well-positioned to ride out the residential downcycle.
- Increasing its leverage to 0.5x (from 0.1x) will give it debt headroom of SGD1.4b, which will allow it replenish land bank as prices corrects.
- After adjusting our sales recognition time-line and rolling forward our valuation basis, RNAV estimate falls to SGD3.44 (from SGD3.65).
- TP is lowered to SGD2.25 (from SGD2.37), based on unchanged 35% RNAV discount.
- We continue to like Wing Tai for its strong balance sheet and low valuation at RNAV discount of 46% and P/BV of 0.5x.
- Maintain BUY.
Derrick Heng CFA | http://www.maybank-ke.com.sg/ Maybank KE 2015-08-14
2.25
Down
2.37
