Wing Tai Holdings is a leading property developer and lifestyle company in Singapore. Listed on the Singapore Exchange since 1989, the Group has core businesses in property development and investment, lifestyle retail and hospitality management in key Asian markets. It has a wide geographical presence across other countries like Malaysia, Hong Kong and China through its subsidiaries.
Wing Tai Holdings was first founded in 1955 and has more than 30 years of experience in property development. The Group has diversified into other business segments such as apparel retailing by forming joint ventures with major retail brands such as Adidas, UNIQLO, and G2000 to boost its fashion retail presence across Asia. It operates mainly through 3 segments: Development Properties, Investment Properties and Retail. As of 2021, its Development Properties segment continues to contribute a main bulk of its operations, taking up ~86% of total revenue for the six months ended 31 December 2021 (“1H22”).
For 1H22, revenues for Wing Tai Holdings grew 26% year-on-year (“YoY”), mainly due to progressive sales recognized from its development properties such as The M at Middle Road and Le Nouvel Ardmore. Operating profit increased slightly from SGD 50.54m in 1H21 to SGD 50.98m in 1H22. However, total profit for 1H22 declined slightly by 6% YoY, largely due to higher cost of sales and lower contributions from its associates and joint ventures.
Proceeds from this bond offering will be used to finance the Group’s working capital requirements and investments, as well as to refinance its existing borrowings. Both Wing Tai Holdings Limited and the new bond offering are expected to be unrated. The 5-year SGD senior unsecured bond is fixed rate, and it is expected to mature on 25 May 2027. The initial price guidance (“IPG”) of the bond is 4.45%, and as of 12pm, orderbooks for the new issue are in excess of SGD 200m.
As for its credit profile, Wing Tai Holdings maintains a strong financial position based on its latest results. As of 31 December 2021, its current ratio stood at 4.92x, and it has SGD 713.8m of cash and cash equivalents, which is more than sufficient to cover its total borrowings of SGD 574.1m (net gearing: -0.04x). Compared to other property developers, Wing Tai Holdings remains highly conservative and prudent with a total debt-to-asset ratio of 13.27% as at the end of last year, while its interest servicing ability remains healthy with an EBITDA coverage ratio of 3.22x.
The Group recently announced that it will be redeeming the SGD 150m of 4.080% senior perpetual bond (“perp”) on its call date on 28 June 2022. Following which, Wing Tai Holdings intends to refinance the perp with the new issuance. It is worth noting that the perp and new bond issuance will be classified as equity and debt respectively based on accounting rules. While we do not know the exact issuance size as of the writing of this article, we do expect its net gearing ratio to increase following the new bond offering and redemption of the perp. Nonetheless, the Group still maintains healthy credit metrics in terms of its liquidity, leverage and interest coverage.
In terms of relative valuation, we think that the new issue is attractive with an IPG of 4.45%. Compared to its existing 2030 bond that has a yield to maturity (“YTM”) of 3.78%, the new bond offers a higher yield with a shorter time to maturity of 5 years. However, we do note that the 2030 bond is first callable on 16 Jan 2025, and the yield to next call date is ~4.53%. Nonetheless, the redemption amount on its first call date is 101.84, which is rather uneconomical and unlikely for the issuer to redeem the bond early.
The Group also has other shorter duration bonds, including a 2023 bond that is yielding ~2.40%, as well as a 2024 bond that has a YTM of ~3.35%. At initial price guidance, the new bond issuance looks more attractive as it is priced above its current yield curve. Nonetheless, investors should note that the final price guidance will likely be lower as compared to the initial price guidance. For more information about the new 5-year bond, investors may refer to the bond factsheet here.
Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds positions in the WINGTA 4.080% Perpetual Corp (SGD) and the analyst who produced this report hold a NIL position in the abovementioned securities.
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