WingTai’s FY14 profit plunges 55% amid weak residential market and sluggish retail sales

Its fundamentals will remain weak in the near future.

Mainboard-listed residential and lifestyle company Wing Tai Holdings disappointed shareholders and analysts alike with its lacklustre FY14 results. The company’s operating profit decreased by 55% from $435.4 million to $197.6 m, while its revenue plunged 40% to $803.4 million.

According to CIMB, the disappointing performance can be attributed to the weakness in the domestic residential property market and cost pressures on the retail segment.

“The weak residential market in Singapore, especially in the high-end segment, remains a drag on Wingtai’s earnings, impacting both top-line growth and margins. Management has cited scarcity and rising costs for foreign labour, rising rent, and e-commerce growth as key threats to retailers, pushing up occupancy costs to the high-20%s as opposed to ~20% three years ago,” noted the report.

Here’s more from CIMB:
Although Wingtai’s fundamentals are expected to stay weak in this period, its balance sheet remains extremely robust, with net gearing at 0.16x.

While we expect weak demand for the high-end market to persist, The Tembusu (85% sold so far) should help to support earnings and record substantial margins given its legacy land

While the mass-market brands, such as Uniqlo, continue to do well, mid-tier brands are affected by cheaper e-commerce alternatives. Moving forward, we believe a strategic review and remix of brand offerings might help to relieve some of the competition from e-commerce.