Wing Tai Holdings - CGS-CIMB Research 2018-08-28: Boosted By Associates’ Disposal Gains

Wing Tai Holdings - CGS-CIMB Research 2018-08-28: Boosted By Associates’ Disposal Gains WING TAI HLDGS LTD SGX:W05

Wing Tai Holdings - Boosted By Associates’ Disposal Gains

  • Wing Tai's 4QFY6/18 and FY6/18 results boosted by associate's disposal gains.
  • FY18 core net profit was above expectations at 651% of our forecast.
  • Improved residential sales in Singapore also boosted bottomline.
  • Recurrent income accounted for a small 10% of FY18 topline; the group plans to explore acquisition opportunities for income yielding assets.
  • Maintain HOLD, Target Price at S$1.97.

Results highlights

  • Wing Tai reported 4QFY6/18 net profit of S$S$129.8m (vs. S$9.5m in 4QFY6/17) on an 80% increase in turnover to S$105.8m. The surge in bottomline was largely due to higher-than-projected associate contributions of S$115.3m and a S$12.6m fair value gain on investment properties.
  • For FY18, Wing Tai reported net profit of S$218.8m (EPS: 27.47 Scts) vs. S$20.1m a year ago. FY18 core net profit was above our expectations at 651% of our and 1,039% of Bloomberg consensus forecasts. It proposed total DPS of 8 Scts (3 Scts final, 5 Scts special), translating to a yield of 4%.

~ ~ Where SG investors share

Higher associate contributions boost bottomline

  • The jump in associate income was largely due to higher contribution from its 33.4% stake in Wing Tai Properties in HK (369 HK). While management did not provide further breakdown, it indicated that the improvement was due to share of gains recognised by its associate for the disposal of two investment properties – Winner Godown Building and W Square.
  • Separately, we note that Wing Tai Properties HK reported a 130% surge in its 1HFY18 net profit to HK$1,035.5m, largely due to recognition of HK$693.3m disposal gain. Handover of residential units at Malaren Gardens Shanghai also added to profits.

Robust residential sales boost FY18 profits

  • Residential revenue jumped 152% to S$192.2m, thanks to higher sales in Singapore and contributions from BM Mahkota in Penang. Given a more buoyant residential market in Singapore in 1H, it sold a further 16% of Le Nouvel Ardmore, bringing take up rate for the development to c.35% to date.
  • In addition, sales at 40%-owned The Crest in Singapore also improved, with a further 31% of the project transacted in FY18. The recent launch of The Garden Residences garnered a 40% sell-through rate for the 156 units launched so far. Contributions from the latter should be felt from FY19F onwards.
  • Management expects the private residential market to remain subdued post cooling measures and will be selective on its land banking activities.

Building a recurrent income base

  • Wing Tai generated S$35.9m of rental income (10% of topline) in FY18 from its office and serviced residence properties in Singapore. With a healthy balance sheet and net cash position, the group will explore acquisition opportunities for income yielding assets, particularly in Australia and Japan.
  • Together with Abacus Property Group, it had jointly acquired an office building at 464 St Kilda in Melbourne for A$95.4m in Apr 2018. This should provide a small boost to its recurrent income base going forward.

Maintain HOLD

  • We raise our FY19-20F EPS by 17.2-63.1% as we slow down our residential sales projections due to the subdued residential market in the near term. However, our RNAV and Target Price remained relatively unchanged at S$3.58 and S$1.97 (pegged to 45% discount to RNAV) respectively.
  • We maintain our HOLD recommendation as we anticipate the stock to perform in tandem with the broader market, supported by dividend yield of 4%.
  • Upside catalyst could come from faster-than-expected capital redeployment into RNAV-accretive assets.
  • Downside risks include slower-than-expected residential sales.

LOCK Mun Yee CGS-CIMB Research | 2018-08-28
SGX Stock Analyst Report HOLD Maintain HOLD 1.97 Up 1.960