Thursday, October 8, 2009

WingTai - Hold by DBS (07 Sep 09)

Wing Tai’s Best Kept Secret
• Wing Tai subsidiary, DNP, could see revenue of RM1.5-1.8bn over next few years
• S’pore prime landbank will be held back, L’VIV reconfigured to address interest in smaller units
• Maintain HOLD, TP S$1.80 based on 20% discount to RNAV of S$2.25

Bringing Colour To DNP. We recently hosted a series of client meetings with Wing Tai and its subsidiary, DNP Holdings (which we initiated coverage on in Sep) in S’pore and KL. DNP shared that its suite of sites around KLCC is expected to rake in RM1.5-1.8bn in revenue over the next few years, underpinning its earnings growth. With a 54% stake in DNP, Wing Tai will benefit from the recovery in the KL property market. Wing Tai reiterated that it has no plans to privatize DNP for now.

Holding Back The Prime Stuff. In Singapore, sales at Belle Vue and Ascentia Sky have normalized to a few units a week. Anderson 18 (50% JV with City Dev) will likely start construction soon but management said that this, along with Ardmore Point, would not be launched below S$3,000 psf. As such, we believe any launch of its prime landbank is awhile away. The most likely launch in the near future will be L’VIV (at Newton), recently reconfigured from 100 to 147 units, for a greater proportion of 1 and 2-bedroom units.

Maintain HOLD, TP S$1.80 based on 20% discount to RNAV of S$2.25 (prev S$2.18). Wing Tai’s share price has retreated 12% since we downgraded it to a HOLD at end-July. While its investment story remains intact, with a potential earnings boost from DNP, high exposure to a more cautious Singapore residential sector means nearterm share price performance is likely to be range-bound in line with the market.

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