SINGAPORE (Aug 25): CIMB Research is maintaining its “add” recommendation on Wing Tai Holdings while lifting its target price to $2.32 from $2.05 previously, which is pegged at a 35% discount to a revalued net asset value (RNAV) estimate of $3.57.
This comes after the property group yesterday posted a set of FY17 earnings that came in ahead of the research house’s expectations.
See: Wing Tai posts near-trebling of FY17 earnings to $20.1 mil
In a Thursday report, analyst Lock Mun Yee notes that while Wing Tai registered lower residential revenue over the year in review, in addition to an impairment charge on its The Crest property in Singapore, this was offset by higher rental income and better retail operations, with the latter turning in a $27.4 million EBIT on the positive benefits of cost rationalisation.
Aside from $215 million worth of residential sales in China and Malaysia which the group has locked in, the analyst is confident Wing Tai’s recent joint acquisition of a land parcel in Serangoon with Keppel Land will boost the group’s income visibility in Singapore once the development is launched.
“Wing Tai 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,” says Lock.
“We anticipate the positive impact on earnings and valuations to be felt from FY18 onwards. In addition, Wing Tai has a net gearing of 0.02x and a gross cash hoard of $847 million, as at end FY17. This puts the group in a strong position to deploy capital. We understand Singapore would remain its core focus,” she adds.
Post Wing Tai’s FY17 results, CIMB has cut its FY18F and FY19F estimates by 9.5% and 5.7% respectively after re-evaluating the group’s residential sales assumptions, while its revalued net asset value (RNAV) estimate has been raised to $3.57 to reflect the completion of Wing Tai Malaysia’s privatisation.
Acceleration in balance sheet deployment and restocking land inventory would present potential catalysts, while the downside risk is a slower-than-expected recovery of Singapore’s residential market, says Lock.
A net profit of $19.7 million, or 2.54 cents per share, has been projected for the group in FY18F, giving it a P/E of 84.6 times.
The stock is also trading 0.5 times FY17F book with a forward dividend yield of 2.82.
As at 10am, shares in Wing Tai are trading 2 cents higher at $2.15.
