Wing Tai - Large write-downs highly unlikely

Cautiously Optimistic on Singapore Property space. While management is more positive now on the sustainability of the current physical market resurgence, they are still maintaining a cautious stance. The instability of global financial markets and the unraveling of potential deferred payment scheme defaults are seen as the key risk factors. For now, the company intends to hold off on land bank acquisition and ride on the improvement in transaction volumes to clear some inventory at reasonable profit levels. Over the longer term, management believes that factors such as the opening of the Integrated Resorts and the return of expatriates on the back of a recovering global economy will induce foreign buying in the Singapore Property market, which should in turn improve long term fundamentals of the sector.

Seeking comfort from profile of buyers. Wing Tai has sold 45 out of total of 79 units launched at the Belle Vue Residences out of which 30 units were sold at S$1,600-1,900 psf in the last 3-4 weeks.The buyers are mostly (80%) Singaporeans that have the purchasing power and the ability to take delivery. A large portion of them are private residential upgraders that are capitalizing on prices that are about 30% off peak levels. The company is further encouraged by the fact that there are no bulk buyers or buying under shell companies for their projects this time round. Management also noted that property owners who cashed out from earlier enbloc deals are returning to the market for investment properties.

Large write-downs highly unlikely. Management doesn't see write-downs for land banks as an issue in the current environment. On its office properties, however, there is less clarity than in the residential segment, and there could be some downside on the back of falling rentals and capital values. The passing rentals are above S$10 psf pm at the Winsland House and the new renewals have been done at the S$8-9 psf pm. The occupancies are around 90-95%. Adjustments are not expected to be substantial, since the previous revaluation was done in a relatively conservative manner.

Retail business sees slight pick up from late May. The retail business started slowing from February, after the Chinese New Year period. It has since picked up from late May. However, on an overall basis, it is still down about 10%.

Keen on China. On venturing overseas, the company has suspended its residential project in Chengdu since the Sichuan earthquake due to negative sentiments surrounding tall buildings. The development would have been one of the tallest buildings in the CBD. Having said that, it is watching for China projects very closely, and hopes to secure projects with mid-to-high end market positioning soon.

Slightly more cautious in Malaysia. Wing Tai has deferred construction on Menara DNP in Malaysia. The reason for holding back on the luxury project is that demand is not expected to be strong in the near term. Due to the oversupply in the KLCC area, the company is focusing its attention on its developments in the embassy belt ? Verticas Residensi, and the Jalan U-Thant Site.

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