Market could do with Wing Tai plainspeak

August 22, 2008
Market could do with Wing Tai plainspeak
By KALPANA RASHIWALA

WHEN Wing Tai Holdings holds its fourth-quarter and full-year results
briefing next Tuesday, it will be the last of the major Singapore-
listed property groups to announce results for the period ended June
30, 2008. Net earnings are expected to be lower than the $382 million
record performance for the preceding year. But the wait may still be
worth it, if the Cheng brothers who helm the group once again give a
candid assessment of the state of the Singapore property market.

The duo has made some of the frankest pronouncements on market
prospects. Last August, during the early days of the US sub-prime
mortgage crisis, Wing Tai chairman Cheng Wai Keung was probably the
first major developer to say publicly that sub-prime woes had slowed
property transactions across the entire market in Singapore.

He said: 'Yes, temporarily, it has affected some of the take-up
rates. But it is actually not a bad thing. The market needs a bit of
consolidation. High-end home prices have gone up 100 per cent within
the last 6-9 months. It's just not sustainable. But if sub-prime
settles within a reasonable period, I believe there is still room to
grow in the property market. We're not at the end of the property
cycle.

'On the other hand, if sub-prime or the credit market continues to be
in turmoil and it affects confidence in general, then, of course, it
will be a completely different scenario,' he had added.

That was in August last year. By February this year, when the sub-
prime crisis and its bite on the local property market had worsened,
some developers here were still singing a positive tune, hoping the
sub-prime gloom would blow away after mid-year.

* Upfront

But Wing Tai deputy chairman Edmund Cheng told BT at the time that it
may not be realistic to expect sub-prime problems to fade away by mid-
year. 'They are likely to linger beyond this year, as the exposure
has extended to many other areas, and it may still take some time for
the full extent of exposure to be discovered,' he said.

Now, with the official forecast for Singapore's GDP growth this year
trimmed and all-round warnings for tougher times ahead, the market
will hopefully once again be able to count on the Cheng brothers to
deliver an honest verdict for the property market - and perhaps even
offer some advice for property investors caught in the turbulence.

After all, Wing Tai itself has been through tough times. It was one
of the worst-hit developers during the Asian financial crisis. It
chalked up huge losses and was strained by a pile of debt.

It had bought some high-priced residential plots in Singapore in June
1997, on the eve of the Asian crisis. These included a 99-year
leasehold residential site at Draycott Park that it purchased at
$1,103.60 per square foot per plot ratio (psf ppr) and another plot
in the Newton Road area for $611.91 psf ppr. The price of the
Draycott plot remained a record for 99-year leasehold prime district
residential land for about a decade.

* Better shape

Wing Tai had high net gearing ratios (over 1) during the Asian crisis
years and again during the more recent property slowdown in 2000-
2004. Today, the group is in much better financial shape. As at March
31, 2008, its net gearing ratio was 0.5.

Like all developers, Wing Tai will try to hold off launches given the
current weak market sentiment, especially since it has strengthened
its financial position from the recent Singapore residential market
boom between 2005 and 2007.

But, as Morgan Stanley Research said in a recent report: 'Should the
residential market remain subdued for a prolonged period, Wing Tai
may have no choice but to stomach lower selling prices to entice
buying activity, particularly if the other developers have cut
selling prices in their projects.'

The group's existing Singapore residential land bank was by and large
acquired at more attractive prices, except for a 40 per cent stake in
a 99-year leasehold plot at Alexandra Road bought for $639 psf ppr
late last year.

Fortunately for Wing Tai, its other prime district freehold sites
like Anderson 18, Ardmore Point, Belle Vue and Newton Meadows were
acquired between 2005 and May 2007 at relatively attractive prices of
$1,650 psf ppr and $1,369 psf ppr for Anderson 18 and Ardmore Point
respectively and about $660 psf ppr for both Belle Vue and Newton
Meadows.

If necessary, Wing Tai could take a hit on selling prices for new
condos on these sites and should still be able to make a decent
profit. Wing Tai seems to have learnt its lessons from the past and,
hopefully, history will not repeat itself. As a bonus, the Cheng
brothers may again offer probing insights into the local property
market next week.