KUALA LUMPUR (May 6): It may appear to be a double whammy for Wing Tai Malaysia Bhd’s shareholders — lower earnings plus cash call.
The company’s share price shed as much as 2.9% today, as the property developer cum apparel retailer announced a proposed rights issue to raise up to RM197 million and a nearly 42% plunge on its quarterly net profit.
As at 3pm, the hardly-trading Wing Tai's (fundamental: 1.05; valuation: 2.4) share price fell five sen or 2.86% to RM1.70, with 199,400 shares having changed hands.
Yesterday (May 5), Wing Tai announced its net profit plunged 41.9% to RM8.5 million in the third quarter ended Mar 31, 2015. Revenue declined 26.9% to RM82.99 million, from RM113.47 million a year ago.
Philip Capital fund manager Ang Kok Heng told theedgemarkets.com that Wing Tai has been facing headwinds in its core businesses.
“Property development launches are slow, hence dragging down profit.
“The retail landscape is tough, due to analyst downgrades in consumer stocks and the introduction of the goods and services tax. Wing Tai also faces competition from retail players like Padini,” he said over the telephone.
Under its retail division, Wing Tai carries brands such as Topshop, Dorothy Perkins, Warehouse, Pumpkin Patch and Wallis. Wing Tai also carries the Uniqlo brand, but via a joint venture (JV) with Japan’s Fast Retailing Co. Ltd.
Revenue from its retail division came in lower at RM136.3 million, due to the “soft market that was flushed with discounts and the weakening of the ringgit”, Wing Tai said yesterday.
But its recorded share of profit from JVs grew higher to RM9.8 million, from RM4.6 million previously.
The company’s proposed rights issue to raise up to RM197 million, is slightly more than one third of its current market capitalisation of RM537.88 million.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)