Wing Tai's 2QFY16 results missed by a mile, with net profit plunging 85% y/y to a mere $1.1m. This brought 1HFY16 earnings of $3.1m (-90%) to just 4% of street's full year estimate.
For the quarter, revenue fell 5% to $120.6m, due to reduced progressive recognition at The Tembusu and slower development sales at Le Nouvel Ardmore in Singapore, The Lakeview in China, and Phase 2 of Jesselton Hills in Penang.
The main drag on bottom line was from a $6.2m tax charge, reversing from a $0.3m tax credit in 2QFY15.
Management continues to guide for weaker performance in Singapore and Malaysia, but expects China operations to benefit from policy relaxation.
Despite the soft showing, Maybank-KE views the challenging market conditions as largely priced-in and expects Singapore's residential market to bottom out in the year ahead.
The house believes Wing Tai is well-positioned for the property downcycle in Singapore, given its low net gearing of 0.11x, which should allow it to replenish land bank on the cheap.
Maybank-KE reiterates its Buy rating and TP of $1.91 for the developer, based on the house's discounted RNAV/share of $2.28 against book value of $4.09.
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