1HFY15  (Jun)  results  were  below  expectations,  with  core  net  profit  of MYR23.6m  (-10%  YoY)  meeting  40%  of  our  FY15  forecast  on  lower contributions  from  property  development  and  apparel  retailing.  We upgrade Wing Tai to NEUTRAL (from Sell) and keep our SOP-based TP of MYR1.76 (1.1% upside). We maintain our FY15F earnings numbers as we are hopeful its Penang projects can deliver better sales in 2HFY15.  
 
Below  expectation.  Wing Tai’s 1H15 core net profit of MYR23.6m (-10%  YoY) missed  our target,  accounting for  about  40%  of our full-year target.  The  lower  bottomline  was mainly  due  to lower  contribution  from both  property  development  and  apparel  retailing  businesses.  YoY, revenue was 4% lower at MYR166.8m, while PBT of MYR52m was 49% higher YoY. There was an exceptional gain of MYR20m arising from the disposal  of  its  25%  stake  in  Indonesian  joint-venture  (JV)  company  PT Windas  Development.  After  stripping  off  the  one-off  gain,  PBT  was  9% lower  at  MYR31.8m.  2QFY15  core  net  profit  was  MYR12.6m  (+14% QoQ, +17% YoY), thanks to higher sales from its retail apparel segment as  2Q (September-December  period)  usually  posts  higher  sales  during the calendar year end.  

Not  out  of  the  woods  yet.  Operating  profit  contributions  from  its  two core  businesses,  namely  property  development  and  apparel  retailing segments  were  lower  at  MYR14.2m  (-5%  YoY)  and  MYR12.1m  (-47% YoY)  respectively  due  to  lower  property  sales  and  a  soft  retail  market flushed with discount and an increase in operating cost.  

Upgraded  to  NEUTRAL  with  an  unchanged  TP  of  MYR1.76.  Share prices have retraced since 19 Nov 2014, following weaker-than-expected 1QFY15  results.  We  are  maintaining  our  FY15  revenue  and  net  profit forecasts  as  we  are  hopeful  that  its  Penang  projects  (BM  Utama  and Jesselton  Hill  projects)  can  deliver  better  sales  in  2HFY15.  We  are upgrading  our  recommendation  to  NEUTRAL  (from  Sell)  on  Wing  Tai, with  an  unchanged  TP  of  MYR1.76  based  on  SOP  valuation.  This is calculated  by  applying  FY15F  11x  P/E to its  property  development  unit and FY15F 9x P/E to its retail segment.

Financial Exhibits

Financial Exhibits

SWOT Analysis

Company Profile

Wing Tai Malaysia engages in property development and investment holding, as well as apparel retailing and garment manufacturing

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Source: RHB