SINGAPORE (March 10): CIMB is upgrading Wing Tai Holdings to “add” with a higher target price of $2.05 on the back of what could be an earnings recovery in FY18.
In a Thursday report, CIMB says earnings are likely to trough in FY17 and resume its upwards trajectory in FY18.
This is expected to be led by an improvement in the local luxury residential market, bigger development profits in China and Malaysia as well as hogher contributions from retail operations.
Residential activities in Singapore, particularly at its Le Nouvel Ardmore project, is likely to be buoyed by rising interest in luxury properties as the segment is perceived to offer value after a 20-30% price decline from its peak.
Potential penalty charges for its non-fully sold projects have been well flagged and likely to be reflected in the current share price.
Meanwhile, maiden contributions from Malaren Gardens in Shanghai are likely to be felt from FY18. The launch of 138 units in Phase 1 has attracted a 90% takeup rate at a higher-than-expected average selling price of RMB 35,000 ($7,188) psm.
Wing Tai’s other development in Shanghai, a retail-cum-office mixed-use project, should also double investment property gross floor area and bolster its recurrent income base significantly by FY19.
In addition, the potential roll-out of the completed Le Nouvel KLCC in Malaysia should immediately impact the bottomline.
Over on its retail front, CIMB expects the rationalisation exercise, including trimming the store count in FY16, to increase sales productivity.
And with the strong performance of Uniqlo in Singapore and Malaysia, CIMB sees this segment of Wing Tai’s business remaining in positive territory with modest sales growth projection.
Shares of Wing Tai are trading 1.4 cents higher at $1.93 at 12.56pm on Friday.
