Given soft conditions in the domestic real estate space, Wing Tai’s earnings continued its downtrend over the latest quarter as the group’s 1QFY17 PATMI decreased 48% YoY to S$1.1m (versus S$2.0m in 1QFY16).

Topline over the quarter similarly slipped 59% YoY to S$70.2m largely due to lower numbers from the property development division, and we also saw share of profits from JVs and associates fall 21% YoY to S$5.8m given weaker contributions from Wing Tai Properties Ltd in Hong Kong. We judge this quarter’s result to be broadly within expectations.

In Sep 2016, the group acquired a freehold commercial building in Melbourne, Australia, with a site area of 1,270 sqm and we understand management is keen to explore investment opportunities in the markets it operates in. With its portfolio of prime residential and investment assets and a low gearing of 5% with S$965.7m cash, the group remains well-positioned to ride out the current down-cycle and make accretive acquisitions opportunistically.

Maintain BUY with an unchanged fair value estimate of S$2.43..

Source: OCBC Research - 17 Nov 2016