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Wing Tai - Maybank Kim Eng 2016-03-09: Could looming deadlines spur deals around unsold homes?

Wing Tai - Maybank Kim Eng 2016-03-09: Could looming deadlines spur deals around unsold homes? WING TAI HLDGS LTD W05.SI 

Wing Tai (WINGT SP) - Could looming deadlines spur deals around unsold homes? 


Maintain BUY with TP Trimmed to SGD1.86 

  • We cut FY16 EPS by 62% for lower residential sales and larger losses for its retail business. Accordingly, our TP dips to SGD1.86 from SGD1.91
  • With looming QC and ABSD deadlines for its residential projects, we believe Wing Tai could structure deals to offload its unsold units. Their successful sale could bring relief to investors. 
  • Our RNAV includes the market values of its overseas units, Wing Tai Malaysia and Wing Tai Properties. Every 10% increase in their market values could add 6 Scts to our RNAV and TP. 
  • Maintain BUY for potential catalysts from value-unlocking deals. 

Urgency to Structure Deals 

  • With looming QC and ABSD deadlines for its residential projects, we believe Wing Tai could structure deals to offload its unsold units. 
  • Nouvel 18, its 50:50 JV project with CityDev (BUY, TP SGD9.04), has not been launched. There will be QC penalties from Nov 2016 if its units are unsold. With 38 of the 43 units at Le Nouvel Ardmore still unsold, the company will need to start paying QC penalties for these units from Apr 2016. 
  • The Crest, its 40% JV project, is also substantially unsold (366 out of 469 in Jan 2016), with 1.5 years to its ABSD deadline in Sep 2017. Developers will be penalised even if one unit is unsold by the deadline. 
  • Its recently established fund-management platform could be a conduit to offload these projects, in our view. 

Adjusting Sales for Resi & Retail 

  • With only four months left to the end of its financial year, our sales expectations for its residential projects could be missed. We cut FY6/16 sales accordingly. 
  • Operating loss for its retail business was SGD8.8m in FY6/15. As the sector has not recovered, we build in larger losses for this year.



Derrick Heng CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-03-09
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 1.86 Down 1.91


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