Brokers’ take: DBS initiates ‘buy’ on Wing Tai, sets S$2.05 target on diversified real estate portfolio

DBS Group Research has initiated coverage on Wing Tai with “buy” at a target price of S$2.05 on the property and retail player’s diversified Asia-Pacific real estate portfolio, DBS said in a report on Monday (Jun 27).

The target price represents a 15.2 per cent upside from the counter’s trading price as at 2.02 pm. Wing Tai’s shares were trading at S$1.78, up S$0.02 or 1.14 per cent, at the time.

Wing Tai owns development and investment properties in Singapore, Malaysia, Hong Kong, China, Japan and Australia, with a retail arm that houses well-known brands such as Uniqlo. 

The premium retail franchise is a key market leader in South-east Asia’s apparel industry and generates profits that could bring in recurring income and support the group’s near-term earnings as it builds its property development business, said DBS’s research team.

Wing Tai had announced in May that its wholly-owned subsidiary had won the tender for the collective purchase of Lakeside Apartments at S$273.9 million.

“Wing Tai remains on the hunt to replenish its landbank and will be selective in the upcoming government land sales/en bloc tenders,” said DBS.

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Its analysts expect that the group will continue to build its development pipeline, which they predict could catalyse an upside to its revalued net asset value. 

DBS also noted that while the property market is expected to slow due to recent cooling measures and an anticipation of interest rate hikes, approximately 95 per cent of Wing Tai’s development properties in Singapore have been sold, which could shield it from the moderating property market.

The group is trading at 0.44 times its price to net asset value ratio, an “attractive valuation relative to pre-Covid ratios”.

Given observations similar to a partial offer made by the Cheng family in 2012, privatisation or takeover could be in the cards in the long term for Wing Tai. These, together with potential mergers and acquisitions, could act as positive catalysts for the group, DBS said.