Wing Tai Holdings - CIMB Research 2017-08-24: Expect Better Times Ahead

Wing Tai Holdings - CIMB Research 2017-08-24: Expect Better Times Ahead WING TAI HLDGS LTD W05.SI

Wing Tai Holdings - Expect Better Times Ahead

  • Wing Tai's 4Q17 and FY17 net profit came in ahead of expectations, making up 161%/341% of our FY17F projections.
  • The weaker Singapore residential was offset by stronger rental and retail income.
  • It locked in S$215m of residential sales in China and Malaysia, and replenished its Singapore landbank with the Serangoon land parcel.
  • Successfully privatised Wing Tai Malaysia; gearing falls to a low 0.02x as at endFY17.
  • Maintain Add with a higher Target Price of S$2.32.

4QFY17 results highlights 

  • Wing Tai (WINGT) reported a 4QFY17 net profit of S$9.5m, up four-fold from the previous corresponding period, despite a 58% decline in revenue to S$58.6m. For FY17, it achieved a net profit of S$20.1m, +184% yoy. 
  • Results were ahead of our expectations on higher-than-projected associate and JV contributions, thanks to the inclusion of fair value gains. 
  • The group proposed a total DPS of 6 Scts, translating to a yield of 2.8%.

Residential contributions fell on impairment for Singapore project 

  • Residential revenue fell 77% yoy to S$76.4m in FY17, dragged by slower sales of S$142m (vs. S$161m in FY16). In addition, it took an impairment charge on The Crest in Singapore, ahead of its scheduled ABSD penalty. As a result, it posted a S$15.7m loss for the residential division. The Crest is currently 43% taken up. 
  • Meanwhile, take up at Le Nouvel Ardmore remained unchanged in FY17 (vs. FY16).

Offset by higher rental and retail profits 

  • The decline in residential earnings were offset by higher rental income and better retail operations. The latter turned in a S$27.4m EBIT (vs. S$4.2m in FY16) as the positive benefits of cost rationalisation filtered through.

WINGT has locked sales of S$215m in China and Malaysia 

  • Looking ahead, WINGT has locked in S$215m worth of residential sales in Malaysia and China, which will be recognised when these units are completed. The Phase 1 of Malaren Gardens in China is 90% sold. 
  • It recently acquired a land parcel in Serangoon, jointly with Keppel Land, which can house c 600 units. This will further boost income visibility in Singapore when launched.

Successful privatisation of Wing Tai Malaysia 

  • WINGT recently completed the privatisation of Wing Tai Malaysia, holding a 96.75% stake at the closing of the exercise. It intends to compulsorily acquire the remaining shares and delist the company from Bursa Malaysia. We anticipate the positive impact on earnings and valuations to be felt from FY18 onwards. 
  • In addition, WINGT has a net gearing of 0.02x and a gross cash hoard of S$847m, as at end FY17. This puts the group in a strong position to deploy capital. We understand Singapore would remain its core focus.

Maintain Add 

  • We cut our FY18F and FY19F estimates, post results, as we re-evaluate our residential sales assumptions, and adjust our RNAV to reflect the completion of the privatisation of Wing Tai Malaysia. Accordingly, our RNAV is raised to S$3.57. 
  • Our new TP of S$2.32 is pegged at a 35% discount to RNAV. 
  • Potential catalysts are acceleration in balance sheet deployment and restocking land inventory. 
  • Downside risk is a slower-than-expected recovery of the Singapore residential market. 

LOCK Mun Yee CIMB Research | 2017-08-24
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 2.32 Up 2.050