WING TAI HLDGS LTD
W05.SI
Wing Tai Holdings - Take a longer term view
- Subdued Singapore residential market a drag on volume sales.
- Overseas performance could improve in the medium term.
- Stable rental income from investment properties
- Retail division performance to remain modest.
- Maintain Hold with an unchanged RNAV-based target price of S$2.05.
■ Challenging Singapore residential market
- High supply of new completed inventory coupled with restrictive policies had reduced volume transactions and prices of high-end projects.
- expect this to persist in the short to medium term, affecting Wing Tai’s 50%-owned Nouvel 18 and Le Nouvel Ardmore.
- However, in a worst-case scenario where Wing Tai is unable to make any sales for the two projects, an extension premium penalty in 2016 and 2017 will only reduce its RNAV by 2% and 3%, respectively.
■ Overseas contributions to improve in the medium term
- In Malaysia, cautious buying sentiment remains. Meanwhile, relaxation of home purchase restrictions in certain cities in China should lift sentiment and enable Wing Tai to tap the opportunity to sell units at its Horizon Lakeview and market its Luodian project in 2HCY16.
- In Hong Kong, associate contributions will continue to drive recurrent income from its commercial property portfolio, grow its hospitality income and identify right market windows to market and sell its residential projects.
■ Stable investment properties
- Investment properties account for 34% of its total assets and occupancies are healthy, at 91% for Singapore commercial properties and 81% for serviced residences in Singapore and Malaysia. These are likely to support earnings given the weakness in the residential market.
■ Modest retail division performance
- Retail operations (including associate contributions) generated total PBT of c.S$2m in FY15.
- Despite good performance from selected brands such as Uniqlo, the general retail sector remains fairly challenging as retailers continue to battle with the slow retail sales environment and high labour cost.
- As such, we expect contributions from this division to remain modest.
■ Maintain Hold
- We think Wing Tai’s share price could remain range-bound in the near term.
- Meanwhile, its healthy balance sheet with 0.1x gearing and valuations at 52% discount to RNAV could limit downside risks. Hence, despite the 20% upside to our target price, we maintain our Hold call due to the lack of potential near-term catalysts.
LOCK Mun Yee
CIMB Securities
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http://research.itradecimb.com/
2015-12-09
CIMB Securities
SGX Stock
Analyst Report
2.05
Same
2.05
