Wing Tai

Kim Eng on 14 Feb 2012


Wing Tai (WINGT SP) – Too early to be excited
Previous day closing price: $1.285
Recommendation – Hold (maintained)
Target price – $1.12 (raised)


No earnings surprise. Wing Tai reported a 46% YoY improvement in 1HFY Jun12 net profit to $59.3m, largely in line with our expectations. We expect earnings to be more back-end loaded, with greater recognition from the projects under construction in 2HFY Jun12. 2QFY Jun12 earnings came in almost flat YoY at $34.2m. Maintain Hold.


Earnings underpinned by associate projects. Wing Tai’s associate projects, mainly Floridian at Bukit Timah and Ascentia Sky at Alexandra, were key earnings contributors, accounting for 61% and 51% of 1H and 2Q PBT, respectively. As of December last year, the projects are 95.6% and 92.3% sold, respectively.


High-end segment still in a quagmire. Following the Singapore government’s introduction of the Additional Buyer’s Stamp Duty (ABSD) last December, demand for high-end properties still remains very weak. We expect Wing Tai to capitalise on the current low interest rate environment and upgraders’ demand for quality homes to launch the remaining 285 units of the Foresque Residences at Chestnut Avenue.


Cautious on new acquisitions. Wing Tai continues to be a notable absentee from recent Government Land Sales tenders despite a low net gearing of 0.26x, as management remains cautious on the Singapore residential market. We think that this is the right move, given that the downside risks to land prices now outweigh any potential upside as the economic outlook remains highly uncertain.


Maintain Hold. Wing Tai has been a standout performer in 2012, with a 32.4% increase in its share price year-to-date. While we like Wing Tai’s strong balance sheet and prudence, we think that the physical property market is likely to get worse before it gets better, potentially capping further gains in its share price. We have kept our forecasts unchanged and are maintaining our Hold recommendation, raising our target price slightly to $1.12 (pegged at a 60% discount to RNAV), in line with the recent liquidity-driven rally.