We maintain our Hold rating with lower RNAV-based target price and core EPS as we push back development earnings.
Weak set of results
Wingtai’s FY15 core net profit of S$30m was below at 51% of our and 36% of consensus estimates, on weaker development earnings and lower overseas contributions. Development properties EBIT was down 47% yoy, coming largely from The Tembusu, Le Nouvel Ardmore, Foresque Residences and Helios Residences in Singapore and The Lakeview in China. For the full-year, Wingtai sold 436 residential units valued at S$417m, down from last year’s 565 units valued at S$618m. Investment properties EBIT grew by 6% yoy, with improved occupancy across both its commercial properties and serviced residences. Retail contributed S$1.9m of EBIT for the full-year (vs. S$6.9m last year). A 3 Scts dividend was declared, translating into 1.6% yield.
Subdued outlook on all front
Management expects the environment to remain challenging for the residential sector and prefers to be conservative in terms of land banking. The key markets of Singapore, Malaysia and China have varying issues and management deems its existing land bank in these countries to be sufficient for the next few years. Despite Uniqlo’s good performance, management has highlighted that the general retail segment continues to be challenging and plans to consolidate non-performing stores in the coming year. Investment properties are likely to remain resilient, but contribute only 30-40% of Wingtai’s EBIT (ex-reval).
Strong balance sheet and cheap valuation the saving grace
A strong balance sheet of 0.1x (vs. peers’ 0.37x) and cheap valuation of 42% discount to RNAV could support its share price. However, the subdued outlook in all its core segments is likely to limit room for growth in its share price. We maintain our Hold rating on the lack of re-rating catalysts. (Read Report)
Source : CIMB Research