SINGAPORE (July 12): Deutsche Markets Research has upgraded Wing Tai Holdings to “buy”, with a target price of $1.90. This comes as the research house calls the stock a “strong value proposition” in a report dated Monday.
The re-rating follows Wing Tai’s sale of its 50% stake in Nouvel 18 to property developer City Developments for $411 million last week with an implied price of $2,619psf. This represents a 16.4% upside from the research house’s assumed clearing price of $2,250psf.
Deutsche sees the sale of the 50% stake in Nouvel 18 as a means for Wing Tai to de-risk its portfolio and minimise qualifying charges. With the sale, only one project in Wing Tai’s portfolio - Le Nouvel Ardmore, will be subject to Qualifying Charges which is estimated at $72 million through 2018.
On the earnings front, the research house has raised Wing Tai's FY16 earnings estimates by $6 million and FY17 estimate by $41 million on account of the sale of its 50% stake in Nouvel 18.
Looking ahead, Wing Tai is expected to swing into a net cash position in FY17 and the research house sees more reason for the family to consider privatisation given the value proposition, says Deutsche analyst Chien-Fie Man, lead author for the report.
Downside risks identified by the research house include a downturn in the Singapore residential and retail markets, acquisition risk and execution risk.
As at 11.32am, Wing Tai was up 0.9% at $1.665.