Shareholders still eligible for bumper divvy. We reiterate our BUY recommendation on Wing Tai, with a slightly higher TP of SGD2.80, pegged to a 30% discount to RNAV. While 1Q FYJun14 core earnings dipped both QoQ and YoY, we see that as a non-event, with the fairly successful launch of The Tembusu yet to contribute to earnings. Shareholders are still eligible for the 12 cts/sh dividend (3 cts ordinary, 9 cts special) before the stock goes ex-div on 5 Nov.

Results largely in line with expectations. Wing Tai’s 1Q FYJun14 core PATMI came in at SGD24.5m (-37% QoQ; -66% YoY), mainly due to lower profit recognition as well as lower associate earnings, mainly from Wing Tai Properties Hong Kong (369 HK). Nonetheless, this was largely within expectations. Projects that contributed were mainly Foresque Residences, L’VIV, the additional units sold at Helios Residences, as well as the Jesselton Hills landed property project in Penang, where Ph1 of over 100 homes were completed in the quarter.

Sales at The Tembusu moderating. Since the launch of the 337-unit The Tembusu in August, sales have been registered for 217 units as of end-Sep, according to the URA’s statistics for a healthy 64% take-up rate. We estimate that another 10-15 units may have been sold since then, with ASP remaining at around SGD1,500 - 1,600 psf. Due to the early stages of construction, we expect The Tembusu to begin earnings contribution only in late FYJun14.

Prince Charles Crescent site slated for 4Q CY13/1Q CY14 launch. Wing Tai’s PCC site is expected to be launched in 4Q13 or 1Q14. At an estimated breakeven cost of ~SGD1,450 psf, we estimate an ASP of SGD1,750 psf. Meanwhile, SingLand is likely to launch its own 495-unit project nearby called Alex Residences in the coming weeks with a slightly lower estimated breakeven of SGD1,400 psf. The pricing and demand for Alex Residences will provide further benchmarks for Wing Tai to price the PCC project.

Reiterate BUY. Wing Tai’s balance sheet remains rock solid with a net gearing of just 0.13x. We firmly believe that its 0.6x P/B valuation is unjustified and reiterate our BUY recommendation with a TP of SGD2.80, which implies a 0.77x P/B and still slightly below its mid-cycle P/B valuation of 0.84x.  

Source: Maybank Kim Eng Research - 28 Oct 2013