Wing Tai Malaysia Bhd

Transcription

1 25 October 2012 Stock Idea Chaw Sook Ting Tel : +6(03) sookting.chaw@my.oskgroup.com Wing Tai Malaysia Bhd BUY Target RM2.06 Previous - Price RM1.75 Major Shareholders (%) Wing Tai Holdings Ltd 60.96% Stock Information Market cap (RMm) Share Capital (m) OSK 188 Ticker WINGTM Industry Properties Company Description Wing Tai Malaysia engages in property development and investment holding as well as apparel retailing and manufacturing of textile garments. Poised For Strong Growth Wing Tai Malaysia Bhd is anchored by its two core businesses, namely property development and apparel retailing. Its fundamentals are underpinned by: (i) its ability to tap into its parent company s extensive networks in Malaysia, Singapore, Hong Kong and China, (ii) its duo core businesses in property development and apparel retailing, and (iii) tremendous growth potential in its apparel retailing, especially Uniqlo. Based on our sum-of-part valuation, we derive a FV of RM2.06, which suggests a potential price upside of 18%. Duo core businesses. Wing Tai Malaysia Bhd (Wing Tai), formerly known as DNP Holdings Bhd, is a 60.96%-owned subsidiary of Wing Tai Holdings Ltd. It involves in property development and investment holding, retailing of apparel and garment manufacturing. Its revenue is mainly derived from its two core businesses, namely property development and apparel retailing. High-end property player. Specialising in mid- to high-end segment properties, Wing Tai s development projects are mainly located in the central and the northern Peninsular Malaysia with a total potential GDV of over RM2.4b. Currently, it has five projects in the pipeline with combined unbilled sales of RM311m as of end-june One of them is the Verticas Residensi project in Jalan Ceylon, located at the heart of Kuala Lumpur s Golden Triangle. With a takeup rate of 70% as of June 2012, the project, which is slated to complete by 2Q2013, will be a major contributor to the group s property development business in FY13. Huge growth potential in retailing. Wing Tai carries 11 fashion brands in Malaysia such as Topshop, Topman, Dorothy Perkins, Warehouse, Pumpkin Patch, Wallis, Karen Millen, BCBG Maxazria, Diva, Miss Selfridge and Ben Sherman. The company has a total of 69 retail outlets (excluding Uniqlo) as of end-june Currently, Topshop, Topman and Dorothy Perkins are the top three sales contributors to the group. In the past three years, the number of stores grew from 53 stores in FY10 to 69 stores in FY12, while revenue per store climbed steadily from RM2.33m/store to RM2.43m/store over the same period. The company is expanding its retailing business aggressively, aiming to open 15 outlets in FY13 and to achieve a total of 100 stores by Besides Klang Valley, Wing Tai is looking at new market opportunities in eastern Peninsular Malaysia and East Malaysia. In addition, it is currently looking to add new fashion labels to increase its brand portfolio. Uniqlo to boost earnings. Wing Tai has tied up with Fast Retailing Co Ltd (Uniqlo Japan) under a 45:55 joint venture (JV) agreement. Uniqlo Malaysia s revenue is expanding rapidly with its five outlets located in Farenheit 88 Mall, Suria KLCC Mall, Mid Valley Megamall, 1 Utama Store, and Setia City Mall. It is eyeing two new outlet openings in Sunway Pyramid and Paradigm Mall by November this year. BUY, RM2.06 FV. Over the years, Wing Tai has successfully transformed itself from a garment manufacturer to an established property developer and an apparel retailing group. We like Wing Tai for: (i) its ability to tap into its parent company s extensive networks in Malaysia, Singapore, Hong Kong and China, (ii) its reputation as a premier modern property developer in Kuala Lumpur and Penang, and (iii) tremendous growth potential in its apparel retailing, especially Uniqlo. We are recommending a BUY on Wing Tai with a FV of RM2.06 based on sum-of-part valuation, pegged at the property industry s average PER of 8x and the apparel retailing industry s average PER of 8.5x on its projected FY13 earnings. FYE June (RMm) FY09 FY10 FY11 FY12 FY13f Revenue Net Profit % chg y-o-y Consensus n.a EPS (sen) DPS (sen) Dividend yield (%) ROE (%) ROA (%) PER (x) BV/share (RM) P/BV (x) Malaysia Equity / OSK Retail Research / PP 17482/07/2013(032828) Page 1 of 8

2 Background Duo core businesses. Wing Tai Malaysia Bhd (Wing Tai), formerly known as DNP Holdings Bhd, is a 60.96%-owned subsidiary of Wing Tai Holdings Ltd. It is involved in property development and investment holding, retailing of apparel and garment manufacturing. Its revenue is mainly derived from its two core businesses, namely property development and apparel retailing. Property development and apparel retailing contributed about 57% and 37% of its total revenue respectively in FY12. Investment Case High-end property player. Specialising in mid- to high-end segment properties, Wing Tai s development projects are mainly located in the central and the northern Peninsular Malaysia with a total potential GDV of over RM2.4b. Currently, it has five projects in the pipeline with combined unbilled sales of RM311m as of end-june Figure 1 : Wing Tai s ongoing projects Land Area (acres) % Stake own by Total GDV Takes up rate Expected Wing Tai (RM m) 30 June Completion Date Ongoing Projects 12 (FY) Verticas Residensi % % 2Q Unbilled 30 Jun 2012 BM Utama - Ph % 61 66% 2Q13 14 Jesselton Hills - Ph % 82 61% 1Q14 28 Impiana Commercial Hub % % 2Q13 5 Taman Sri Impian - Jusco % % 3Q13 50 Upcoming Projects BM Utama - Ph % 68 n.a. 4Q15 n.a. Jesselton Hills - Ph % 73 n.a. 3Q15 n.a. Nobleton Crest 1 100% 110 n.a. 4Q13 n.a. Le Nouvel % 900 n.a. 4Q15 n.a. Sunway % 185 n.a. TBC n.a. Sering Ukay Ph % TBC n.a. TBC n.a. Langgak Golf % TBC n.a. TBC n.a. Total , Source: Company, OSK Research Figure 2 : Wing Tai s property development projects in KL city centre Source: Company Page 2 of 8

3 Most of the group s property development projects in the central region are located within the Kuala Lumpur city centre, including Verticas Residensi and the upcoming projects such as Nobleton Crest, Le Nouvel, and Sering Ukay Phase 3, among others. Projects in the northern Peninsular Malaysia of Penang include Jesselton Hills, BM Utama (Bukit Mertajam), and Impiana Commercial Hub. Its Verticas Residensi project is located along Jalan Ceylon, at the heart of Kuala Lumpur s Golden Triangle. With a take up rate of 70% as of June 2012, the project, which is slated to complete by 2HFY13, will be a major contributor to the group s property development business in FY13. Figure 3 : Verticas Residensi Near-to-completion project Figure 4 : Verticas Residensi Near-to-completion project Source: Company, as of Sept 2012 Source: Company, as of Sept 2012 Niche player. Unlike major property developers like SP Setia and Gamuda Land which own big parcels of land, Wing Tai primarily focuses on niche market that emphasises on niche location and product offerings that could maximise earnings. The company is also tapping into resources from its parent company, i.e. Wing Tai Asia s networks across Asia to promote its property projects. Adding Lanson Place Bukit Ceylon into its property investment segment. Currently, Wing Tai has two high-end service apartments along Jalan Ampang, Klang Valley managed by Lanson Place, namely Ambassador Row Serviced Suites (221 keys) and Lanson Place Kondominium No 8 (132 keys). It is introducing a new flagship property Lanson Place Bukit Ceylon in 2HFY13. Wing Tai is planning on rebranding and upgrading both its existing properties as well as cross marketing and promotions, riding on its parent company s regional exposure. Figure 5 : Property investment list Occupancy rate in FY12 (%) Average room rate in FY12 (RM) No. of rooms Ambassador Row Serviced Suites 88% Kondo 8 57% Lanson Place Bukit Ceylon n.a. n.a. 115 Source: Company Huge growth potential in retailing. Wing Tai carries a number of fashion brands in Malaysia such as Topshop, Topman Dorothy Perkins, Warehouse, Pumpkin Patch, Wallis, Karen Millen, BCBG Maxazria, Diva, Miss Selfridge and Ben Sherman. The company has a total of 69 retail outlets (excluding Uniqlo) as of end-june Currently, Topshop, Topman and Dorothy Perkins are the top three sales contributors to the group. In the past three years, the number of stores grew from 53 stores in FY10 to 69 stores in FY12, while revenue per store climbed steadily from RM2.33m/store to RM2.43m/store over the same period. The company is expanding its retailing business aggressively, aiming to open 15 outlets in FY13 and to achieve a total of 100 stores by Besides Klang Valley, Wing Tai is looking at new market opportunities in eastern Peninsular Malaysia and East Malaysia. In addition, it is looking to add new fashion labels to enhance its brand portfolio. Page 3 of 8

4 Figure 6 : Some brands carried by Wing Tai Figure 7 : Historical per store performance (RMm) FY10 FY11 FY12 FY13f FY14f (stores) Revenue per store (RMm) EBIT per store (RMm) No. of stores Source: Company, Source: Company, OSK Research Uniqlo to boost earnings. Uniqlo is one of Japan s top fashion wear brands. In 2010, the company partnered with Fast Retailing Co Ltd (Uniqlo Japan) to open the first Uniqlo fashion store in Malaysia. Under the joint venture (JV) agreement, Wing Tai holds 45% stake in Uniqlo Malaysia while Uniqlo Japan owns the remaining 55% stake. Uniqlo Malaysia established its first outlet at Farenheit 88 Mall, followed by a flagship store in Suria KLCC Shopping Mall. The better-than-expected performance of its Fahrenheit 88 and Suria KLCC outlets drove the company into an aggressive expansion mode, where it proceeded to open three more outlets in Mid Valley Megamall, 1 Utama Store, and Setia City Mall. Currently, the Japanese retail outfit is expected to open two new outlets in Sunway Pyramid and Paradigm Mall by November this year, with a total floor area of over 10,000 sq ft each to showcase various Uniqlo collections including men, women, kids, etc. Figure 8 : Uniqlo Sunway Pyramid artist perspective Figure 9 : Uniqlo Paradigm Mall artist perspective Total floor area: Approx. 10,100 sq ft Source: Uniqlo website Total floor area: Approx. 12,900 sq ft Source: Uniqlo website Strong brand recognition. Wing Tai s comprehensive fashion portfolio allows each brand to target different consumer groups. Among them, Topshop appeals to younger generation for its London youth culture and fashion, Dorothy Perkins caters for the plus-size women segment, while Uniqlo is known for its casual wear. Despite stiffer competition from new players such as H&M, which broke into the Malaysian market just recently, we believe with continued brand positioning and brand recognition, Wing Tai s apparel retailing business will continue to do well. Page 4 of 8

5 Industry Prospect Relatively stable property market outlook. According to CH Williams Talhar & Wong s (WTW) 2012 property market report, Malaysia s property market will likely grow at a slower pace compared to WTW gathered a poll from its branch office managers on the market direction of eight property segments (office, retail, hotel, condominiums, residential, high-end residential, shop-office, and industrial) by three criteria (transaction activity, price and occupancy, and sales rate). Overall market direction is stable (see Figure 10), with both condominium and residential segments showing a stable trend in 2012 versus an uptrend in Going forward, we expect this stable trend to continue in 2013, given the deteriorating global economic outlook. The International Monetary Fund (IMF) has recently downgraded 2012 global economic growth forecast from 3.5% to 3.3%. The Fund has also revised down its 2013 forecast to 1.5% from 1.8% for advanced countries and from 5.8% to 5.6% for emerging and developing countries. Figure 10 : Market direction by transaction activity Figure 11 : Employment index vs consumer sentiment index Source: CT Williams Talhar & Wong s Property Market Outlook 2012 Source: Malaysian Institute of Economic Research Consumer sentiment remains strong. According to Malaysian Institute of Economic Research (MIER), consumer spending in Malaysia remains firm with consumer sentiment index (CSI) climbing further to in 2Q12, in line with a low unemployment rate of 3.1% in July Inflationary pressure remains low as well, with consumer price index (CPI) registering an increase of 1.4% in August In addition, various government measures including the second release of a one-off RM500 aid under the Bantuan Rakyat 1Malaysia (BR1M), the Skim Amanah Rakyat 1Malaysia (SARA 1Malaysia) scheme, as well as salary hike for civil servants should combine to boost the disposable income and purchasing power of Malaysians. Financials Weaker FY12 results on exceptional items. Wing Tai reported weaker-than-expected FY12 results, with earnings sliding 16% to RM84.9m despite a 24% revenue increase to RM457.7m. The lower bottom line was mainly attributed to a fair value loss of RM6.0m on its investment property Kondo 8, a one-off impairment of RM13.0m for its Jakarta investment in FY12 as well as the incorporation of tax credit RM3m in FY11. Excluding the exceptional items, Wing Tai s FY12 performance would have been slightly better off than the previous financial year with an EBIT margin of 44%. Figure 12 : FY12 financial performance 3Q12 4Q12 Q-o-q chg YTD FY12 YTD FY11 Y-o-y chg Revenue % % EBIT % % Interest expense (1.6) (1.8) 10.1% (6.6) (2.8) 132.6% Associates % % PBT % % Tax (12.3) (8.2) -33.5% (36.3) % MI n.a. n.a. Net Profit % % EPS (sen) % % DPS (sen) n.a. n.a. n.a. n.a n.a. EBIT margin 31.6% 19.0% n.a. 26.5% 26.8% n.a. NTA/share (RM) n.a. Source: Bursa Malaysia Page 5 of 8

6 Consistent dividend payout. Despite not having a dividend policy, Wing Tai is constantly been paying dividends since its listing in In FY11, it paid a net dividend of 8.0 sen (single-tier dividend of 5 sen) and a special dividend of 3 sen per share to reward its shareholders. This translated into a decent dividend yield of 4.6%. Going forward, we expect the company to maintain its dividend trend of paying at least 25% - 30% of its annual net earnings. Figure 13 : Revenue breakdown by business segment (FY12) Figure 14 : Segmental profit by business segment (FY12) Property investment 5% Garment 1% Property investment 1% Garment 1% Property developmen t 57% Retail 37% Property development 69% Retail 29% Valuation & Recommendation BUY, RM2.06 FV. Over the years, Wing Tai has been successfully transformed itself from a garment manufacturer to a property developer and an apparel retailing group. We like Wing Tai for: (i) its ability to tap into its parent company s extensive networks in Malaysia, Singapore, Hong Kong and China, (ii) its reputation as a premier modern property developer in Kuala Lumpur and Penang, and (iii) tremendous growth potential in its apparel retailing, especially Uniqlo. We are recommending a BUY on Wing Tai with a FV of RM2.06 based on sum-of-part valuation, pegged at the property industry s average PER of 8x and the apparel retailing industry s average PER of 8.5x on its projected FY13 earnings. The company is currently trading at a single digit forward FY13 PER of 4.7x, lower than its 5-year average PER of 10x. Page 6 of 8

7 Appendix : Financials Figure 15 : Revenue trend RMm Figure 16 : Earnings trend RMm Figure 17 : Debt-to-equity (%) Figure 18 : NTA / share RM Figure 19 : Historical dividends Figure 20 : Shareholders equity sen Gross DPS (sen) Dividend yield (%) (%) RM Page 7 of 8

8 OSK Research Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated (NR): Stock is not within regular research coverage All research is based on material compiled from data considered to be reliable at the time of writing. However, information and opinions expressed will be subject to change at short notice, and no part of this report is to be construed as an offer or solicitation of an offer to transact any securities or financial instruments whether referred to herein or otherwise. We do not accept any liability directly or indirectly that may arise from investment decision-making based on this report. The company, its directors, officers, employees and/or connected persons may periodically hold an interest and/or underwriting commitments in the securities mentioned. Distribution in Singapore This research report produced by OSK Research Sdn Bhd is distributed in Singapore only to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, CAP. 289 of Singapore. If you are not an Institutional Investor, Expert Investor or Accredited Investor, this research report is not intended for you and you should disregard this research report in its entirety. In respect of any matters arising from, or in connection with, this research report, you are to contact our Singapore Office, DMG & Partners Securities Pte Ltd ( DMG ). All Rights Reserved. No part of this publication may be used or re-produced without expressed permission from OSK Research. Published by :- Published by OSK Research Sdn. Bhd., 6th Floor, Plaza OSK, Jalan Ampang, Kuala Lumpur Printed by Xpress Print (KL) Sdn. Bhd., No. 17, Jalan Lima, Off Jalan Chan Sow Lin, Kuala Lumpur OSK Research Sdn. Bhd. ( V) (A wholly-owned subsidiary of OSK Investment Bank Berhad) Branches Malaysia Malaysia Research Office OSK Research Sdn. Bhd 6 th Floor, Plaza OSK Jalan Ampang Kuala Lumpur Malaysia TEL :+(60) FAX :+(60) Hong Kong Hong Kong Office OSK Securities Hong Kong Ltd. 12 th Floor, World-Wide House 19 Des Voeux Road Central, Hong Kong TEL :+(852) FAX :+(852) Singapore Singapore Office DMG & Partners Securities Ptd Ltd. 10 Collyer Quay #09-08 Ocean Financial Centre Singapore TEL :+(65) FAX :+(65) Indonesia PT OSK Nusadana Securities Indonesia Plaza CIMB Naga, 14 th Floor, Jl. Jend. Sudirman Kav.25, Jakarta Selatan 12920, Indonesia Shanghai OSK (China) Investment Advisory Co. Ltd. Room 6506, Plaza 66, No.1266, West Nan Jing Road Shanghai China Phnom Penh OSK Indochina Securities Limited No.1-3, Street 271 Sangkat Toeuk Thia, Khan Sen Sok, Phnom Penh Cambodia TEL :+(6221) FAX :+(6221) TEL :+(8621) FAX :+(8621) TEL :+(855) FAX :+(855) Bangkok OSK Securities (Thailand) PCL 10 Floor, Sathorn Square Office Tower 98, North Sathorn Rd, Silom Bangrak, Bangkok Thailand TEL :+(66) FAX :+(66) Page 8 of 8