Wing Tai Holdings Limited - Will cooling measures stop its rapid rise?

17/1/2013 – The property market is full of contradictions.

The seventh cooling measures by the government to curb property prices are predicted to have as little impact as the six rounds of measures that went before it.

2012 will be remembered as the year where new private home sales first exceeded 20,000.

This was despite the introduction of the Additional Buyer’s Stamp Duty in late 2011, which hardly had any impact on the demand for mass market homes.

Maybank Research says the possibility of new measures was largely anticipated by the market but the timing was somewhat of a surprise.

The analyst believes the impact on the high-end segment will be less significant than the mass market segment.

While property stocks took a hit after the cooling measures were first announced, investors who bought Wing Tai holdings shares in January 2012 must have enjoyed their new year party like no one else.

This is because their money that was invested in this stock almost doubled in one year!

Maybank says Wing Tai got the ball rolling when the Chairman made a partial offer to take his family’s stake to just over 50%.

So, can there be any room for the share price to go higher?

Despite the share price almost doubling in one year, it is still trading at a 35% discount to book value.

Price is what you pay, value is what you get.

So in this case you're paying 65 cents for every dollars worth of value.

CIMB Research and Maybank Research consider this counter attractively valued.

It is paying a yield of 1.6% according to Reuters, but both brokers are forecasting a dividend yield of nearly 4%.

Compare that to the interest you receive on your savings in the bank!

The company's business generated $345.7 mln in cash from operations last financial year.

Maybank has a BUY call on the stock with a target price of S$2.50 while CIMB Research has a OUTPERFORM call with already reached target price of S$1.94.

Wing Tai reported a strong set of Q1 FY13 results, slightly ahead of expectations.

DBS Vickers Research says progressive billings and new launches are expected to underpin income stream.

It has a BUY call with a target price of S$2.33.

In the Governance and Transparency Index it scored 47, which puts it in 105th place in the rankings.

Sources & further information

Sources

DBS Vickers Research Report
CIMB Research Report
Maybank Research Report


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