1HFY6/14 net profit came in at SGD73.0m, largely in line with expectations, albeit down 42.4% YoY due to fewer completed units sold and an absence of divestment gains from Wing Tai HK.

We expect profits from Foresque Residences and The Tembusu to underpin earnings in the upcoming quarters. The Crest is likely to be launched within the next two months.

We like Wing Tai’s deep value, backed by its strong management and robust balance sheet. Maintain BUY and TP of SGD2.60, pegged to a 35% discount to RNAV of SGD4.00.

What’s New

Wing Tai reported a 45% YoY decline in 2QFY6/14 net profit to SGD48.4m, on the back of an 86% YoY plunge in associated income to SGD5.7m in the absence of divestment gains. The lower profit was also a result of fewer completed units sold in the quarter, in particular Helios Residences which still has a balance of 15 units.

What’s Our View

In the coming quarters, we expect the bulk of the profits to be from the progressive recognition of Foresque Residences (95% sold, ASP SGD1,100 psf) and The Tembusu (76% sold, ASP SGD1,550 psf). The Crest at Prince Charles Crescent is likely to be launched within the next two months, and we expect an ASP of ~SGD1,750 psf (estimated breakeven SGD1,450 psf).

We remain convinced that Wing Tai’s strong balance sheet of 0.2x net gearing with cash of SGD663.7m will allow the company to tide over headwinds in the Singapore residential sector. Based on our forecasts, a sustainable dividend of 7 SGD cts/share is possible, which implies an attractive yield of 4% pa.

Following the acquisition of a commercial site in Shanghai for SGD225m, we expect Wing Tai to remain on the hunt for more acquisitions in China’s Tier 1 and developed Tier 2 cities.  

Source: Maybank Kim Eng Research - 28 Jan 2014