Wing Tai’s luxury projects boost its 1Q12 revenue to S$109m

Focus on high-end, sales in mid-segment

Singapore projects continue to drive earnings. Wing Tai reported 1Q12 results with revenue at S$109.0m (+59% YoY), mainly contributed by higher development revenue from additional units sold in Helios Residences and progressive recognition from L’VIV. This is supported by associates income of S$24.7m (+71% YoY) with higher contributions from Floridian and Wing Tai HK. Net profit of S$25.1m (+281% YoY) likely driven by higher development contributions but was broadly below expectations. With physical prices more than factored into share price in our view, BUY maintained with stock trading at 0.52x RNAV and P/B.

Focused on high-end, sales in mid-segment. 66 units were sold during the quarter according to caveats, c.83% of sales were booked in the mid-segment mainly from Foresque Residences (99-yr, 496 units; 34% sold) and Floridian (FH, 336 units; 79% sold) vis-a-vis no sales registered for Nouvel 18 and Le Nouvel Ardmore. However i) balance sheet of 24% net gearing is stronger versus previous cycles and ii) Wing Tai is not expected to hurry its sales of luxury projects as landbank replenishment in this segment is likely to be challenging.

This suggests Wing Tai’s holding power for its high-end projects amidst current headwinds which should allay concerns over downside risks for Wing Tai’s RNAV regarding pricing weakness. Wing Tai is expected to continue seeking buyers for the Ardmore projects through private previews.

Share buyback continues, muted impact. Following share repurchases in Jan-Feb 11 at S$1.50-S$1.78, management resumed upping its stake in the company through vehicle Wilma Enterprises with another purchase of 975,000 shares in Sept 11 at S$1.36. While impact on share price is anaemic in line with share buyback by developer peers, this supports our view of value in the stock.

Maintain BUY. While we are negative on residential prices in the medium term, we believe developers’ stock prices including Wing Tai have more than factored in possible concerns in the physical property market. We maintain BUY and TPS$1.98 on deep value. Stock is current trading at 0.52x RNAV and P/B.