Wing Tai Holdings - CIMB Research 2017-03-09: Turnaround in sight

Wing Tai Holdings - CIMB Research 2017-03-09: Turnaround in sight WING TAI HLDGS LTD W05.SI

Wing Tai Holdings - Turnaround in sight

  • Earnings are likely to trough in FY17 and resume upward trajectory from FY18.
  • Growth to be led by residential activities in Singapore, China and Malaysia.
  • Recurrent income base likely to be bolstered by the completion of the Shanghai mixed development by FY19.
  • Improved retail contributions underpinned by rationalisation exercise and better performance from Uniqlo.
  • Upgrade to Add with higher RNAV-based TP of S$2.05.

Earnings growth recovery on the cards 

  • WINGT’s earnings decelerating momentum is likely to trough in FY17 and is projected to resume its growth trajectory from FY18 onwards. This is expected to be led by an improvement in Singapore high-end residential activities, greater China and Malaysia development profits and improved contributions from retail operations.

Singapore residential buoyed by high-end residential 

  • Singapore residential activities, particularly the Le Nouvel Ardmore, is likely to be buoyed by rising interest in high-end residential properties as this segment is perceived to offer value after a 20-30% price decline from the peak. The project is currently 15% sold. 
  • Meanwhile, potential penalty charges for its non-fully sold projects have been well flagged and likely to be reflected in the current share price. 
  • With a dwindling residential inventory, potential landbanking activity is likely to be seen as a catalyst.

China activities gaining momentum with Shanghai project 

  • Maiden contributions from Malaren Gardens in Shanghai are likely to be felt from FY18.
  • The launch of 138 units in Phase 1 has attracted a 90% take-up rate at a higher-thanprojected ASP of Rmb35,000psm. In addition, the potential roll-out of the completed Le Nouvel KLCC in Malaysia should immediately impact the bottomline. 
  • The completion of the Shanghai retail-cum-office mixed-use project should double investment property GFA and bolster its recurrent income base significantly by FY19.

Rationalisation of retail activities bearing fruit 

  • We believe the rationalisation exercise to increase the sales productivity of its retail operations including trimming its store count in FY16 is starting to bear fruit. This is in addition to the strong performance of Uniqlo in Singapore and Malaysia. 
  • We expect this division to remain in the positive territory going forward with a modest growth projection in sales.

Upgrade to Add 

  • We cut FY17 EPS estimates by 73% but raise FY18-19 EPS as we review our launch and sales assumptions across its geographic footprint and update the potential penalties in our numbers. 
  • We upgrade our call to Add from Hold on a potential earnings recovery from FY18. 
  • Our RNAV is raised to S$3.16 and target price of S$2.05 is based on a 35% discount to RNAV. 
  • Key catalysts are an acceleration in balance sheet deployment and landbanking. 
  • Key risks are a protracted recovery of the Singapore residential market.

LOCK Mun Yee CIMB Research | Yeo Zhi Bin CIMB Research | http://research.itradecimb.com/ 2017-03-09
CIMB Research SGX Stock Analyst Report ADD Upgrade HOLD 2.05 Up 1.870