Wing Tai reported that its 3QFY16 revenues and operating profit fell 35% and 91% to S$43.0m and S$1.6m, respectively, as the group faced another challenging quarter in its core residential development and other businesses.

The revenues from the quarter mainly came from progressive sales from the Tembusu and additional units sold in Le Nouvel Ardmore, as well as The Lakeview in China. However, the impact of the slow market was partially offset by a higher contribution from Wing Tai Properties Ltd in Hong Kong, as the group’s share of profits from associated and JVs increased by 625% to S$13.7m over the quarter.

As a result, Wing Tai’s 3QFY16 PATMI decreased 27% to S$2.1m, which we deem to be broadly in line with our expectations.

Despite the group facing significant sector headwinds, we continue to see value in its shares (now priced at an undemanding 0.43x PB) and believe the group remains well-positioned to ride out the current down-cycle with its portfolio of prime residential and investment assets, and a low gearing of 18% with S$793.7m cash. Maintain BUY.

Source: OCBC Research - 9 May 2016