Wing Tai Holdings Ltd - OCBC Investment 2016-05-10: Another Challenging Quarter

WING TAI HLDGS LTD W05.SI

Wing Tai Holdings Ltd - ANOTHER CHALLENGING QUARTER

Wing Tai reported that its 3QFY16 revenues and operating profit fell 35% and 91% YoY to S$43.0m and S$1.6m, respectively, as the group faced another challenging quarter in its core residential development businesses.
However, the impact of the slow market was partially offset by a higher contribution from Wing Tai Properties Ltd in Hong Kong, as the group’s share of profits from associates and JVs increased by 625% YoY to S$13.7m over the quarter.
As a result, Wing Tai’s 3QFY16 PATMI decreased 27% YoY to S$2.1m, which we deem to be broadly in line with our expectations.

Notwithstanding the URA price index slipping 0.7% QoQ over the quarter (versus a 0.5% QoQ decline in the previous quarter), the group saw some amount of incremental sales at its non-luxury tier developments.
According to URA statistics, the percentage of units sold at Wing Tai’s developments – The Tembusu (Tampines) and The Crest (Prince Charles Crescent) – increased to 96% (323 out of 337 units) and 23% (110 out of 469 units) as at end Mar 2016, versus 95% and 21% as at end Dec 2015, respectively.
Conditions in the high-end segment, however, remain difficult and no sales were recorded over the quarter at the group’s luxury developments at Le Nouvel Ardmore and Nouvel 18.

Despite significant sector headwinds, we continue to see value in its shares (now priced at an undemanding 0.43x PB) and believe the group remains well-positioned to ride out the current down-cycle with its portfolio of prime residential and investment assets, and a low gearing of 18% with S$793.7m cash.
Maintain BUY with an unchanged fair value estimate of S$2.43.

Eli Lee OCBC Securities | http://www.ocbcresearch.com/ 2016-05-10

OCBC Securities Analyst Report BUY Maintain BUY 2.43 Same 2.43