Wing Tai

Wing Tai: UOB Kay Hian maintains buy with $1.50 TP. House give thoughts on latest cash partial offer for 8.7% of issued shares by grp’s Chairman. Note that the offer price of $1.39/share represents an 18.3% premium over its last traded price of S$1.175/share and a 9.6% premium over 3-mth vol weighted average price (VWAP). Note that counter is Deep in value, and recommends hold for higher returns. Grp trading at a P/B of 0.47x (vs long-term average of about 1.0x P/B since listing). While offer price is (0.55x PB) at an 18% premium to its last traded price, it is a steep 45% discount to its book value of $2.51/share. Despite the challenging market environment for the high-end segment, estimate that the offer price of $1.39 values Wing Tai’s assets at a 38% discount to the prevailing price levels based on the Enterprise Value of 0.72x. This is tantamount to letting go of exposure to prime Ardmore address (Le Nouvel Ardmore) at a very low level of under $2,100 psf among others. Overall, note that balance sheet remains healthy, low gearing levels of 26%. Wing Tai’s net gearing currently stands at a comfortable 26% (FY11:36%), way below previous crisis gearing levels of about 40% (GFC) and 82% (Asian financial crisis). This assumes that a comfortable gearing of 0.5x presents a debt head room of about $550m.