Hot Stock Wing Tai falls 5% on lower 4Q profit, downgrades

by **Cals** Wed 20 Aug 2014, 00:43

Hot Stock Wing Tai falls 5% on lower 4Q profit, downgrades

Business & Markets 2014

Written by Gho Chee Yuan of theedgemalaysia.com

Tuesday, 19 August 2014 11:58

KUALA LUMPUR (Aug 19): Wing Tai Malaysia Bhd came under pressure on disappointing net profit for the fourth quarter and full year ended June 30, 2014 (4QFY14 and FY14). The profit decline came amid weaker retail businesses and delays in property project launches.

At 10.41am, Wing Tai changed hands at RM2.20, down 11 sen or 4.76%. About 490,000 units were seen traded.

Wing Tai, the fourth largest decliner across Bursa Malaysia, was transacted at RM2.19 at 12.01pm.

Yesterday, Wing Tai said it registered a RM29.41 million net profit during 4QFY14, a 41.2 % drop compared with the previous corresponding quarter. Full-year profit fell to RM70.39 million from RM131.42 million a year earlier.

Analysts said Wing Tai's latest financials had come in below market forecast.

"Wing Tai's 4QFY14 results missed our expectations. This were largely attributable to depressed margins for its retailing division as well as poor property sales for Nobleton Crest luxury condo (at least RM4 million per unit)," said AllianceDBS Research Sdn Bhd analyst Quah He Wei in a note to clients today.

On Wing Tai's retail division, Quah said the result was disappointing as merely RM1 million operating profit (-83% q-o-q, -78% y-o-y) was recorded due to the absence of festive occasions amid higher operating expenses.

"This translated into a 3% operating margin versus 13% in the previous corresponding quarter. However, earnings before interest and taxes (EBIT) in its property segment improved 43% q-o-q but dipped 40% y-o-y to RM23.7 million due to completion of sales of inventory and land held for development of its Johor Bahru project.

"We understand that the launch of its Le Nouvel project, which has about RM1 billion in gross development value has been delayed again, likely due to potentially poor responses in light of the high prices of at least RM4 million per unit," Quah said.

Quah also pointed out that Wing Tai's retail sales might be less than inspiring given inflationary pressure and more cautious discretionary spending.

"Although its retail sales growth may remain healthy with new outlets and new brands, margins may be dampened by higher cost," Quah explained.

These views have prompted AllianceDBS to maintain its "hold" call on Wing Tai shares but revised down the FY15 and FY16 earnings forecast by 25% and 27% respectively to incorporate weaker retailing margins and lower property sales for high-end projects.

AllianceDBS has also nudged down its target price for Wing Tai shares to RM2.10 from RM2.25 previously.

Meanwhile, RHB Research Institute Sdn Bhd maintained its "neutral" stance on Wing Tai shares with a lower fair value (FV) of RM2.10 compared to RM2.16 previously.

The FV downgrade comes with a downward revision in RHB's income forecast for Wing Tai, RHB analyst Chaw Sook Ting said.

"We also revised downward its FY15 revenue and net profit by 2% and 10% respectively. While we still like Wing Tai’s duo-core business model, which helps to buffer the negative impact of unforeseen circumstances, we think the company’s FY14 earnings growth will likely be about 5%.

"For its property segment, we expect the main catalyst to be its Penang projects now that the Penang Second Bridge has been officially opened," Chaw said.