To-date, Wing Tai has sold 82 of the 176-unit Belle Vue Residences. The bulk of it was sold in Q4, at an average of about $1,800 psf as we expected. The project is already under construction, so Wing Tai will be able to recognize profits from it almost immediately.
Based on the URA’s statistics, 31% of the 373-unit Ascentia Sky has been sold as of July, achieving an ASP of about $1,250 psf - about 13.6% higher than the $1,100 psf we were expecting. Having seen the showsuite, we were quite impressed with the product offering and have raised our ASP assumption to $1,200 psf for the whole development. Contribution from Ascentia Sky is expected to kick-in only from FY10.
In line with its peers, we expect Wing Tai to suffer some fair value loss on its investment properties, probably in the magnitude of a 10%-decline, or about $55m. However, such losses will not affect the underlying cash earnings, which comes predominantly from the residential development business.
The current shareprice implies a Gross Development Value of $1,444 psf for its land bank. We think this still significantly undervalues the landbank, which comprises mainly high-end developments such as the remaining 50% of Helios Residences and the two Ardmore Park sites. Maintain BUY with a target price of $2.05, pegged at a smaller 10%-discount to its FY10 RNAV of $2.28.
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