01Feb11-WingTai

7/31/2019 01Feb11-WingTai

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February 1, 2011

DMG & Partners Securities Pte Ltd may have received compensation from the company(s) covered in this report for itscorporate finance or its dealing activities; this report is therefore classified as a non-independent report. Please refer toimportant disclosures at the end of this publication.

See important disclosures at the end of this publication 1See important disclosures at the end of this publication

DMG Research

OSK ResearchOSK ResearchDMG Research

SINGAPORE EQUITYInvestment Research

DMG & Partners Research 2QFY11 Results Review Private Circulation Only

PROPERTY

BUYPrice S$1.64

Previous S$2.20

Brandon Lee+65 6232 [email protected]

WING TAI HOLDINGS

Target S$2.20

2QFY11 within expectations; valuations look cheap

Property Developers

Wing Tai Holdings is Singapores leading midand high-end property developer. Its otherbusinesses include apparel retailing, foodfranchise and hospitality management.

Stock Profile/Statistics

Bloomberg Ticker WINGT SPSTI 3,180Issued Share Capital (m) 794Market Capitalisation (S$m) 1,30252 week H | L Price (S$) 1.93 1.426-Mth Average Volume (000) 1,432YTD Returns (%) (3)2QFY11 Net Gearing (x) 0.3Altman Z-Score 1.6ROCE/WACC 1.2Beta (x) 1.62QFY11 NAV per Share (S$) 2.18

Major Shareholders (%)

Wing Sun Development 28Winlyn Investment 9European Investors Inc 6Fidelity Management & Research 3Wing Tai Holdings 2

Share Performance (%)

Month Absolute Relative1m (3) (3)3m (5) (6)6m (8) (14)12m (16) (32)

6-month Share Price Performance

-

0.50

1.00

1.50

2.00

J ul -1 0 Au g-1 0 S ep- 10 O ct- 10 No v-1 0 De c- 10 J an- 11

(S$)

Maintain BUY with target price of S$2.20. Wing Tais 2QFY11 results werewithin our expectations, helped by higher contributions from developmentprojects and HK-listed associate. Helios Residences and Jean NouvelResidences should be launched in 2Q11 despite recent government measures.While we continue to favour office landlords within the property space, WingTais share price now looks cheap following recent pullback, trading at 25%

discount to RNAV, vs. sectors 12% discount. Our target price is pegged at parityto FY11F RNAV. Key catalysts are pick-up in luxury volumes and acquisitions.

2QFY11 within expectations. Wing Tai posted a 141.5% YoY surge (+78.6%QoQ) in 2QFY11 PATMI to S$53.9m, in line with our expectations. The strongperformance was underpinned by (1) higher contributions from three domesticresidential projects, i.e. Belle Vue Residences, Floridian and Helios Residencesand (2) improved performance from 35%-owned associate Wing Tai PropertiesLimited in Hong Kong. 1HFY11 PATMI accounts for 54.8%/43.2% ofour/consensus full year estimates. Net gearing improved to 0.3x (1QFY11: 0.4x).

Launch update. Management will keep a close watch on the property marketand at appropriate times release more units. We expect Helios Residences andJean Nouvel Residences to launch in 2Q11. As recent tightening measures

should have a heavier impact on mass and mid segments, we think Wing Taisproject in Petir Road could be delayed until 4Q11 1Q12 (previously 3Q11).

Undemanding valuations vs. sector. Since the governments coolingmeasures, Wing Tai has fallen 7.9% (vs. sectors 5.8%). The stock is now tradingat an attractive 25% discount to its RNAV, compared to sectors 12% discount.We see the recent pullback a good opportunity to buy into an establisheddeveloper with low-cost and quality high-end inventory (0.7m sqf or 364 units).Aside from good take-up for two upcoming luxury launches, we think acquisitionscould be another catalyst for the stock. Based on optimal net gearing of 0.5 -0.8x, Wing Tai has ample debt headroom of S$0.4 1.0b to purchase sites.FYE 31 Jun (S$m) FY08 FY09 FY10 FY11F FY12F

Revenue 428.2 501.8 821.9 646.1 807.7Reported PATMI 229.4 21.0 160.8 153.4 209.2

Underlying PATMI 157.8 108.9 140.1 153.4 209.2% chg YoY -29.7% -31.0% 28.7% 9.5% 36.4%Consensus PATMI - - - 194.8 215.9Underlying Basic EPS (S$) 0.21 0.14 0.18 0.20 0.27DPS (S$) 0.06 0.04 0.05 0.06 0.06Div Yield (%) 3.7% 2.4% 3.0% 3.7% 3.7%Underlying ROE (%) 9.8% 6.9% 8.3% 8.5% 10.7%Underlying ROA (%) 4.9% 3.3% 3.8% 4.4% 5.5%Underlying P/E (x) 7.9 11.8 9.1 8.2 6.1P/B (x) 0.8 0.8 0.8 0.7 0.7

Source: Compan data and DMG Estimates


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See important disclosures at the end of this publication 2

See important disclosures at the end of this publication

OSK ResearchOSK ResearchDMG Research

Figure 1: Interim Statement of Profit & Loss (FY ending Jun)

(S$m) 2QFY10 YoY Chg 2QFY11 QoQ Chg 1QFY11 Comments

Revenue 175.6 12.7% 197.8 51.0% 131.0Progressive sales from development projects in Singapore,

i.e. Helios Residences and Belle Vue ResidencesCOGS (95.7) -8.3% (87.8) 52.8% (57.4)Gross Profit 79.9 37.8% 110.0 49.5% 73.6Other Op Income / (Exp) (38.1) -22.7% (29.4) -17.0% (35.5)Op Income / (Loss) 41.8 93.0% 80.6 111.5% 38.1 Higher toplineNon-Op Income / (Exp) (0.3) 1.7% (0.3) 15000.0% (0.0)EBITDA 41.5 93.7% 80.3 110.7% 38.1Depreciation & Amortization (2.9) -7.5% (2.7) -3.7% (2.8)EBIT ex. Profit of Asc / JVs 38.5 101.4% 77.6 119.9% 35.3

Profit of Asc / JVs 6.9 146.2% 16.9 7.8% 15.6Higher contributions from The Floridian in Singapore and

Wing Tai Properties Ltd in Hong KongEBIT incl. Profit of Asc / JVs 45.4 108.2% 94.4 85.4% 50.9Net Interest (5.2) 53.2% (7.9) -14.2% (9.2)Recurring Income 40.2 115.2% 86.5 107.5% 41.7Exceptionals 0.0 - 0.0 - 0.0PBT 40.2 115.2% 86.5 107.5% 41.7Taxation (7.5) 148.0% (18.5) 122.9% (8.3)NPAT ex. EO 32.7 107.8% 68.0 103.6% 33.4EO 0.0 - 0.0 - 0.0NPAT incl. EO 32.7 107.8% 68.0 103.6% 33.4MI 10.4 35.3% 14.1 339.2% 3.2Reported PATMI 22.3 141.5% 53.9 78.6% 30.2

Profitability: 2QFY10 2QFY11 1QFY11Gross Profit Margin 45.5% 55.6% 56.2%Operating Income Margin 23.8% 40.7% 29.1%EBITDA Margin 23.6% 40.6% 29.1%

EBIT Margin 25.8% 47.7% 38.9%Recurring Income Margin 22.9% 43.7% 31.8%PBT Margin 22.9% 43.7% 31.8%NPAT Margin 18.6% 34.4% 25.5%PATMI Margin 12.7% 27.3% 23.0%

Solvency: 2QFY10 YoY Chg 2QFY11 QoQ Chg 1QFY11NAV (S$ per share) 2.06 5.8% 2.18 0.0% 2.18ST Debt (S$m) 64.8 256.5% 231.1 -47.5% 440.0LT Debt (S$m) 1,177.9 -23.9% 896.3 -0.7% 902.8Total Debt (S$m) 1,242.7 -9.3% 1,127.4 -16.0% 1,342.8 Repayment of bank loans on development projectsCash (S$m) 436.4 37.6% 600.3 4.3% 575.7Net Debt (S$m) 806.3 -34.6% 527.0 -31.3% 767.1Total Equity (S$m) 1,761.6 7.8% 1,898.6 0.3% 1,892.1Net Gearing (x) 0.46 -39.4% 0.28 -31.5% 0.41

Source: Company data and DMG Estimates


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DMG Research

Figure 2: SG Residential Portfolio

Projects Location Segment Tenure Stake GFA Total Sold Completion TOP Launch(%) (sqf) (Units) (Dec 10) (Jun 10) (Date) (Date)

Helios Residences Cairnhill Circle Luxury Freehold 100% 222,998 140 51% 50% 31-Mar-11 Jun-07Le Nouvel Ardmore Ardmore Park Luxury Freehold 100% 169,490 43 0% 0% 31-Dec-13 TBAJean Nouvel Residences Anderson Rd Luxury Freehold 50% 313,874 156 0% 0% 30-Jun-14 TBABelle Vue Residences Oxley Walk Prime Freehold 60% 346,655 176 72% 100% 30-Jun-10 Aug-08L'VIV Newton Rd Prime Freehold 100% 120,083 147 69% 0% 30-Jun-13 Feb-10Floridian Bukit Timah Rd Mid Freehold 40% 369,281 336 74% 40% 30-Jun-13 Dec-07Ascentia Sky Alexandra View Mid 99 40% 451,431 373 72% 30% 31-Dec-12 Jul-09Petir Road Site Petir Rd Mass 99 100% 514,121 430 0% 0% 31-Dec-14 TBA

Source: Company data, URA and DMG Estimates

Figure 3: SG Residential Pipeline

Source: Company data, URA and DMG Estimates; estimated using completion status as of Jun 10

Figure 4: SG Residential Quarterly Sales Progress

Projects 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10

Helios Residences 51% 51% 51% 51% 51% 51% 51% 51% 51%Le Nouvel Ardmore Not LaunchedJean Nouvel Residences Not LaunchedBelle Vue Residences 3% 5% 36% 59% 59% 60% 62% 64% 72%L'VIV Not Launched 55% 62% 64% 69%Floridian 5% 7% 24% 36% 39% 43% 59% 69% 74%Ascentia Sky Not Launched 42% 43% 45% 58% 67% 72%Petir Road Site Not Launched

Source: Company, URA and DMG Estimates

Projects Total Launched Total Unsold Unbilled Average Land Breakeven PBTUnlaunched But Unsold Available GFA Sales* Selling Price Cost Price Margin

Units Units Units (sqf) (S$m) (S$psf) (S$psf) (S$psf) (%)(Updated as of Dec 10)

Helios Residences 69 0 69 109,906 178 3,000 603 1,285 59%Le Nouvel Ardmore 43 0 43 169,490 0 3,500 1,369 2,174 41%Jean Nouvel Residences 156 0 156 313,874 0 3,500 1,650 2,492 32%Belle Vue Residences 38 12 50 98,481 0 2,000 656 1,242 41%L'VIV 37 9 46 37,577 173 2,000 665 1,252 40%Floridian 0 87 87 95,617 97 1,400 365 827 44%Ascentia Sky 105 0 105 127,079 119 1,250 639 1,072 18%Petir Road Site 430 0 430 514,121 0 850 345 721 19%Total 878 108 986 1,466,146 567


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DMG Research

DMG & Partners Research Guide to Investment Ratings

Buy: Share price may exceed 10% over the next 12 months

Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain

Neutral: Share price may fall within the range of +/- 10% over the next 12 months

Take Profit: Target price has been attained. Look to accumulate at lower levels

Sell: Share price may fall by more than 10% over the next 12 months

Not Rated: Stock is not within regular research coverage

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This research is issued by DMG & Partners Research Pte Ltd and it is for general distribution only. It does not have any regard to the specificinvestment objectives, financial situation and particular needs of any specific recipient of this research report. You should independently evaluateparticular investments and consult an independent financial adviser before making any investments or entering into any transaction in relation toany securities or investment instruments mentioned in this report.

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DMG & Partners Research Pte Ltd is a wholly owned subsidiary of DMG & Partners Securities Pte Ltd, a joint venture between OSK InvestmentBank Berhad and Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Memberof the Singapore Exchange Securities Trading Limited.

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securities covered in the report, and may also perform or seek to perform broking and other corporate finance related services for the corporationswhose securities are covered in the report.

As of the day before 31 January 2011, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd, do nothave proprietary positions in the subject companies, except for:

a) Nilb) Nil

As of the day before 31 January 2011, none of the analysts who covered the stock in this report has an interest in the subject companies coveredin this report, except for:

Analyst Companya) Nilb) Nil

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01Feb11-WingTai

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