• Initial discounts at OMA OMA

• Clinched Middle Road site

• FV of S$2.41

Don’t fret about Hong Kong

Against the backdrop of demonstrations in Hong Kong, we note that some developers have taken a cautious approach in terms of pricing for primary launches. It has been reported that Wing Tai Properties, an associate of Wing Tai Holdings Limited (Wing Tai), is looking at selling its units at OMA OMA in Tuen Mun at an ASP of HK$12,463 psf, or ~20% lower than Sun Hung Kai Properties’ Mount Regency phase two.

Given the uncertain outlook, we believe that Wing Tai Properties could likely be offering a discount in the initial phase, but might look to adjust prices subsequently. In our view, the benign interest rate outlook and low Mar-May19 unemployment rate of 2.8% should help to support the market, despite the macro headwinds.

In the secondary market, property prices (according to Centaline data) have bottomed out in Feb’19 after a 10% correction from an all-time peak in Aug’18; we believe prices could inch up another 0-5% for the rest of 2019, given the housing supply shortage.

Developments in Japan and Singapore

Last week, Wing Tai announced that it has acquired Red Planet Hotel Asakusa Tokyo for a consideration of 4.25b Yen. This is not surprising, as management has expressed interest previously in acquiring investment properties for recurring income in Australia and/or Japan.

Separately, Wing Tai was awarded a prime Middle Road land parcel at a bid of ~S$492m (~S$1,458 psf ppr), which was ~4.7% higher than the second-highest bid by a tie-up between MCC Land (Singapore) and Greatview Investment. The group intends to make this a residential development with commercial uses at the first storey.

In our view, Wing Tai remains in a good position to weather through the obvious residential headwinds in Singapore, given ts healthy net cash position, viz-a-viz the average net gearing ratio of 65.8% for the peers we track. Wing ai currently trades at a consensus blended forward P/B of 0.45x, which is ~0.7 S.D. below the 10-year ean. We maintain our estimates and fair value of S$2.41.

Source: OCBC Research - 27 Jun 2019