Solid quarter. Wing Tai posted a 1QFY Jun13 net profit of SGD72.1m, which is a 187% YoY increase and 43% QoQ improvement (excl. revaluation gains in the last quarter). 1QFY Jun13 net profit already accounted for 44.5% of our full-year estimate, but we are keeping our forecasts unchanged for now due to the lumpy earnings from the completed projects. The solid first quarter validates Wing Tai as our top pick amongst the residential developers. Reiterate BUY.

Benefitting from sales of completed units. The earnings growth in Q1 was attributable to additional units sold in Belle Vue Residences and Helios Residences. Since the projects have already been completed, profits can be immediately recognized whenever additional units are sold. Progressive recognition of profits from Foresque Residences and L’VIV also contributed to the profits.

Actively marketing Foresque Residences. In the quarter, Wing Tai launched the second phase of Foresque Residences and managed to sell another 115 units at an ASP of around SGD1,100 psf. To date, more than 80% of the 496-unit project has been sold. We expect Wing Tai to continue its marketing efforts to sell the remaining units by the end of the year.

Replenishing landbank. In September, Wing Tai also joined hands with Metro Holdings and United Engineers to secure a 2.4ha condo site at Prince Charles Crescent via the Government Land Sales Programme for SGD516.3m. We estimate the breakeven at around SGD1,450 psf and the ASP is likely to be around SGD1,750 psf. For Wing Tai’s 40% stake, we expect an RNAV accretion of 6 cents/share.

Valuations remain compelling. Wing Tai remains attractively valued at 0.6x P/B, 0.5x P/RNAV, underpinned by a forecast dividend yield of nearly 4%. We reiterate our BUY recommendation, with a slightly raised target price of SGD2.14, pegged at a 40% discount to RNAV.

Source: Maybank Kim Eng Research - 31 Oct 2012