Wing Tai Holdings - CIMB Research 2017-05-23: Makes Takeover Offer For Wing Tai Malaysia

Wing Tai Holdings - CIMB Research 2017-05-23: Makes Takeover Offer For Wing Tai Malaysia WING TAI HLDGS LTD W05.SI

Wing Tai Holdings - Makes Takeover Offer For Wing Tai Malaysia

  • Wing Tai Holdings (WINGT) announced today that it is making a takeover offer for Wing Tai Malaysia.
  • We view the deal positively and expect it to raise WINGT’s RNAV when completed.
  • Maintain Add rating with an RNAV-based target price of S$2.05, pending completion of transaction.

Making a voluntary takeover offer for Wing Tai Malaysia

  • WINGT announced that it is making an unconditional voluntary takeover offer for the remaining 33.87% of shares that it does not own in Wing Tai Malaysia (WTM) (excluding treasury shares). If successful, WINGT does not intend to maintain WTM’s listing on the Main Board of Bursa Malaysia. 

Offer price of RM1.80 is at a 53% premium over last traded value

  • The offer price of RM1.80/share represents a c.53% premium over WTM’s last traded price of RM1.18 (on 22 May 2017), a 47.5% premium over its 5-day VWAP and 71.4% premium over the 6-month VWAP. 
  • However, the offer price is at a 33.3% discount to WTM’s book NAV of RM2.70/share at end-Jun 2016, which appears to be in line with our average sector discount of 32% for Malaysian developers.

Positive move for WINGT

  • We see this transaction as positive for WINGT, as it is earnings accretive by reducing minority leakage from WTM. Furthermore, once WTM is fully owned by WINGT, the drag from WTM’s listing discount on WINGT’s RNAV is likely to be lifted, in our view.
  • We estimate our RNAV for WINGT would be lifted by c.8.5% if WTM’s valuation is pegged to book NAV.

Deal to be funded by internal resources, raising gearing marginally

  • Assuming full acceptance of the offer, the transaction would cost WINGT up to RM290.7m (c.S$94m). WINGT intends to fund this transaction via internal resources.
  • As at end-3QFY17, the group was in a net gearing position of only 6.7% and had a gross cash hoard of S$748m. Post-transaction, assuming full acceptance, we estimate WINGT’s net gearing would rise slightly to 9.7%.

Maintain Add rating

  • We maintain our earnings estimates and RNAV for WINGT, pending completion of this transaction. 
  • We maintain our Add rating with a target price of S$2.05, pegged to a 35% discount to RNAV. 
  • Potential key catalysts are acceleration in balance sheet deployment and landbanking. 
  • A key downside risk is recovery of the Singapore residential market taking longer than expected.

LOCK Mun Yee CIMB Research | Yeo Zhi Bin CIMB Research | 2017-05-23
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 2.050 Same 2.050