Conservative land-banking stance working against Wing Tai, says Maybank

Conservative land-banking stance working against Wing Tai, says Maybank

Michelle Zhu
12/05/17, 11:41 am

SINGAPORE (May 12): Maybank Kim Eng Research continues to rate Wing Tai at “hold” following the release of the property and lifestyle group’s 3Q earnings results on Thursday, while raising its target price on the stock by 5 cents to $1.85 to factor in higher market value of the group’s listed entities, Wing Tai Malaysia and Wing Tai Properties.

(See also: Wing Tai 3Q earnings more than treble to $7.4 mil)

In a Friday report, analyst Derrick Heng says the group’s cautious land acquisition has led to land-bank depletion and poor earnings visibility, hence leading to an “unexciting performance” over the latest reporting period.  

“Wing Tai managed to sell a $15.2 million unit at Le Nouvel Ardmore in Mar’17. Two years after meeting its first QC deadline, the developer continues to hold prices at the luxury project with the latest deal done at $4,005 psf. Its mid-range JV project, The Crest, sold just seven units during the quarter,” recalls the analyst.

“With 66% of the project remaining unsold and just four months before its ABSD deadline in Sep 2017, we expect the developer to pay the associated penalty,” adds Heng.

He also notes that Wing Tai is “struggling to break even” as its low recurring income base is not enough to offset headwinds from its development business.  

“While a strong cash balance implies that it has significant capacity to purchase new development land, we believe escalating land prices has made it increasingly difficult to do so. This, together with a thin recurring income base, will lead to weak shareholder returns near term,” concludes the analyst.  

Maybank has named UOL Group as its preferred “buy” pick for sector exposure at a target price of $7.93.

As at 11:35am, shares of Wing Tai and UOL are trading at $1.87 and $7.09 respectively. 

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