Wing Tai Holdings Ltd - CGS-CIMB Research 2020-08-31: Turning Round The Corner

WING TAI HLDGS LTD (SGX:W05)

Wing Tai Holdings Ltd - Turning Round The Corner

Wing Tai's 2HFY20 core EPS of 4.8/7.4 Scts missed expectations, at 46%/70% of our FY20F forecast.
Earnings trajectory to recover from FY21F on improved residential and retail contributions.
Upgrade to ADD with a higher Target Price of S$1.98.

Wing Tai (SGX:W05) reported 2HFY6/20 (Jan 2020 to June 2020) net loss of S$16.8m despite a 46% rise in revenue to S$187.5m due largely to fair value losses from its wholly-owned investment properties as well as share of revaluation losses from associates and joint ventures and lower retail contributions.
FY6/20 PATMI of S$16m was down 66% y-o-y. Excluding one-offs, operating PATMI would have been S$69.6m, up 85% y-o-y.
Wing Tai proposed final DPS of 3 Scts.

The improvement in operating PATMI was due to higher residential contributions from additional units sold at Le Nouvel Ardmore and progressive billings from The M. The latter is more than 70% sold since its launch in 1QCY20.
According to management, it sold c.S$1bn worth of residential properties in Singapore, Malaysia and China in FY20.
Looking ahead, we believe Wing Tai would continue to benefit from progressive billings from The M as well as continued take-up of units at Le Nouvel Ardmore. The group continues to look for opportunities to replenish its landbank in Singapore.
In Malaysia, it has a 479,812sqm land parcel in Seberang Prai, which will be progressively rolled out over the next 10 years.

Although FY20 rental EBIT was adversely impacted by revaluation losses, rental revenue grew 9.4% y-o-y with additional income from new properties acquired in Australia last year.
Meanwhile, Lanson Place continued to benefit from long-stay guests. In Jul 2020, Wing Tai announced the proposed divestment of 2 completed developments in Malaysia for RM243.8m. The deal is expected to boost FY21F bottomline. We have not factored in any gain from the sale into our current forecast.

Retail operations registered an 83% y-o-y decline in EBIT to S$6.9m, dragged by closure of its stores during the circuit breaker period in Singapore and slower sales in Malaysia. With its retail outlets resuming operations under Phase 2 of the circuit breaker re-opening, we anticipate sales, particularly at the popular Uniqlo outlets, to pick up from FY21F onwards.

We lower FY21-22F EPS by 30-31.4% to reflect slower retail and Malaysia development contributions, partly offset by faster-than-projected sales pace at The M.
Wing Tai is trading at a 57% discount to RNAV of S$3.98 and we think downside is limited. Wing Tai has a gross cash balance of S$605m at end FY20 and net debt to equity ratio of 0.05x, the lowest amongst its peers under our coverage.
See Wing Tai Share Price; Wing Tai Target Price; Wing Tai Analyst Reports; Wing Tai Dividend History; Wing Tai Announcements; Wing Tai Latest News.
Apart from a recovery in its earnings trajectory from FY21F, we believe the re-rating catalyst for share price outperformance will also likely come from redeployment of capital into new development projects or investment properties. Our Target Price of S$1.98 is based on 50% discount to RNAV and offers 15% upside.
Downside risks: slower-than-expected reinvestment of capital.

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-08-31

SGX Stock Analyst Report BUY UPGRADE HOLD 1.98 UP 1.970