Wing Tai Holdings Ltd - UOB Kay Hian 2020-02-13: Late-cycle Economy Play

WING TAI HLDGS LTD (SGX:W05) | SGinvestors.io WING TAI HLDGS LTD (SGX:W05)

Wing Tai Holdings Ltd - Late-cycle Economy Play

  • Wing Tai Holdings (SGX:W05) is a regional real estate company (exposure across Singapore, Malaysia, Greater China), trading at an attractive 46% discount to our S$3.62 RNAV (0.5x P/B).
  • Amid signs of a late-cycle economy, the group sits on a strong balance sheet (0.2x net gearing), resilient earnings, and remains a proxy to the high-end segment. It also benefits from superior ROE returns from its Uniqlo JV in Singapore (36%) and Malaysia (41%).
  • Re-initiate coverage with BUY and target price of S$2.54.



WING TAI HOLDINGS - PRINCIPAL BUSINESSES

  • Wing Tai Holdings (SGX:W05) is a Singapore-based property developer and lifestyle company. The company was listed on the Singapore Stock Exchange in 1989, and has exposure across key markets in the Asia Pacific region (Singapore, Malaysia, China, Hong Kong and Australia).
  • Wing Tai operates through the following business segments: development properties, investment properties, retail, and others.


WING TAI HOLDINGS - INVESTMENT HIGHLIGHTS


Strong balance sheet, resilient business, and stable yield.

  • Wing Tai has among the lowest net gearing among Singapore peers at 0.2x (with inclusion of perpetual securities), and is well-positioned with a c.S$844m acquisition headroom (assuming 50% net gearing), amid signs of a late-cycle global economy. Our forecasts suggest a forward dividend yield of 2.5%, underpinned by recurring earnings (ie over 139% FY19 EBIT)

Uniqlo JV to ride on superior brand performance, high ROEs in Singapore (36%) and Malaysia (41%), and market share consolidation.

  • Wing Tai has 49% and 45% stakes in Uniqlo Singapore and Uniqlo Malaysia, which have enjoyed superior (and growing) ROEs, as a result of margin expansion (Singapore: 5.6% to 12.2%/Malaysia: 5.8% to 13.9%) between FY15-19.
  • In our view, the threat of Internet retailing has induced more rational store expansions plans, consolidated demand, and ultimately higher sales per store (and positive operating leverage). Uniqlo also successfully grew its market share in Singapore (6.3% to 9.8%) and Malaysia (1.1% to 1.7%) among apparel and footwear specialist retailers from 2015 to 2018, according to Euromonitor.

Singapore residential exposure may see uplift, from pent-up investment demand and return of foreign purchases.

  • Management sees opportunities in high-end investment demand from locals, which its Middle Road project (The M) has been geared towards based on its location and planned unit sizes. Although the more onerous ABSD implemented post 05 Jul 18 has quelled transacted volumes for investment units (ie proxied by smaller-sized, higher-psf units) in 3Q18, there are signs of recovery.
  • Re-initiate with BUY and a target price of S$2.54, based on a 30% discount to our RNAV of S$3.62/share.


WING TAI HOLDINGS - SHARE PRICE CATALYST

  • Positive news flow on take-ups for Singapore projects (e.g. The M, Garden Residences).


WING TAI HOLDINGS - RECOMMENDATION






Peihao Loke UOB Kay Hian Research | Nicola Ho UOB Kay Hian | https://research.uobkayhian.com/ 2020-02-13
SGX Stock Analyst Report BUY INITIATE BUY 2.54 SAME 2.54



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