Phillip on The Ground – Wing Tai Holdings Ltd 2019 AGM

We recently attended Wing Tai Holdings (WT) 2019 AGM held on 23 October 2019, below are some highlights:

Results: Earnings lower in FY19 due to lower revenue contribution from Ardmore and BM Mahkota development projects and last year one-off gains from the sale of subsidiary (Yong Yue commercial site in Shanghai) and Wing Tai Properties disposal of 2 properties (industrial and office building). Dividend declared is lowered to 5 cts per share  (3cts ordinary + 2 cts special), compared to the 8 cts (3cts ordinary + 5 cts special) last year.

Property Development:

  1. Sold 389 residential units worth S$414mn in FY19 (FY18: 352 units worth S$603mn).
  2. Profit from development is now recognised when project is completed.
  3. Update on projects:

-The Crest (469 units): TOP in February 2017 and with 36 units unsold.

-The Garden Residences (613 units, JV with Keppel Land): Launched in Jun18 and sold 210 units. Sales from Garden project not as fast as expected.

-Le Nouvel Ardmore (43 units): 21 units unsold

  1. In April 201919, WT was awarded land near Orchard Road, which will be branded The M (>500 units) and will launch next year.


REITs: Need scale before able to form a REIT. WT has 2 buildings (Windsland House I and II, 90% occupancy) in Orchard Road to inject into a REIT. But WT does not need the cash. Australia and Japan properties are too small (combined ~$140mn). There are 4 commercial properties in Australia (2 data centres and 2 commercial buildings).

Asset breakdown: Hong Kong 37% (70% investment and 30% development), 41% Singapore, 11% Malaysia

Malaysia property market: May take a few years to recover especially the high end. The high-end market reflects wealth generated by the economy and foreign investment. Middle market or entrance level developments will be supported by GDP. High-income country to support high-end development will take time.

Retail: Group EBIT improved from S$34.3mn to S$40.1mn. Most of the profit in this division is from Uniqlo. Uniqlo Singapore (49% stake) and Malaysia (45% stake) net profit rose a combined 39% to S$85mn. The 100% managed brands* not performing well (which we can assume is loss-making). There is no retail exposure in Hong Kong.

*Other brands include Topshop, Topman, Dorothy Perkins, Miss Selfridge, Warehouse, Karen Millen, Wallis,BCBG, Burton, Furla and Sergent Major

Hong Kong: Hong Kong has gone through many crises and has emerged stronger. Not many from Hong Kong looking at Singapore development especially if unable to get residence status.


-Book value is $4.19 whilst the share price is 2.05. A huge 50% discount. In fact, the discount to book value is even wider at 80% for HKG Wing Tai Properties (369 HK) that is trading at 0.2x P/BV. The book value excludes the fair value of 2 floors on Winsland House I, 20 Storey service apartment in KL, 5 storey office in Pinang, mark to market value of Wing Tai Properties and any future development loss or profit.

-In our view, property developers are similar to deeply discounted closed-end funds where value is seldom realised until they are closed or for developers, taken over or privatised. It is a value arbitrate that is hard to materialise.

-The company did undertake a cash offer for Wing Tai Malaysia in May 2017. The offer of RM1.80/share was almost 50% discount to independent adviser valuation of RM3.59/share.

*33.1% stake in WingTai Properties is worth only S$376mn vs S$1.6bn value as associates in WT books. Wing Tai Properties is trading at 0.2x P/BV.

# Phillip Securities Research does not have any recommendation on Wing Tai Holdings Ltd

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