Phillip on The Ground – Wing Tai Holdings Ltd 2019 AGM October 24, 2019 1517

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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Paul Chew
Head of Research
Phillip Securities Research Pte Ltd

Paul has 20 years of experience as a fund manager and sell-side analyst. During his time as fund manager, he has managed multiple funds and mandates including capital guaranteed, dividend income, renewable energy, single country and regionally focused funds.

He graduated from Monash University and had completed both his Chartered Financial Analyst and Australian CPA programme.

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