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CIMB RESEARCH has upgraded its "hold" call to "add" for Wing Tai Holdings, with a target price of S$2.09.
At a 44 per cent discount to revalued net asset value (RNAV) and 0.43x FY2015 book value per share (-1 std dev), Wingtai is cheap, said the research house, adding that it believes the weakness in the residential market has been priced in and the company's strong balance sheet and deep discount are likely to support its share price.
It said property prices would need to weaken further before policies could be eased. This is likely to be an adjustment to cyclical restrictions such as elevated transaction costs in the form of stamp duties.
Such tweaks to policies are likely to benefit high-end developers more than those in the mass market. Wingtai will be a direct beneficiary and likely to re-rate with that.
In the meantime, CIMB said Wing Tai's cheap valuation and strong balance sheet are likely to lend support to its share price.
"We upgrade the stock from 'hold' to 'add', as we believe the stock has value for long-term investors. Maintain our RNAV-based target price (30 per cent discount) but cut our FY2015 to FY2017 earnings per share by eight per cent to 19 per cent as we push back earnings recognition for its high-end projects."