Get lucky: Why Wing Tai stock is still worth 35% more in case of zero sales

It could even get away unscathed.

According to Nomura, contrary to their expectation at the start of the year, weak sentiments toward the prime luxury residential market appear to have persisted.

Here's more from Nomura:

While our estimates suggest high-end unsold inventory has fallen by almost half over the past four years, on account of an average 16.1% fall in prime luxury private home prices from its end-2007 peak, the stringent regulation on property purchases and higher transaction costs suggest it could still take a while for the remaining inventory to be taken up.

In the worst case scenario that no additional unit is sold from now on, even after discounts of 10-30% are offered on unsold units, our estimates suggest WINGT could potentially incur additional costs in extension premium and ABSD of SGD0.36/share.

The relaxation of some of the housing market’s cooling measures remains one of the potential surprises for 2014, in our view, and we think that could help stimulate purchases especially in the prime luxury residential segment where prices are already 16.1% off their end-2007 peak.

This could help WINGT move its luxury inventory in Le Nouvel Ardmore and Nouvel 18.

Rather than ascribing an arbitrary discount (i.e. 25% previously) to the value of residential projects in Singapore, we now quantify the appropriate discount by 1) assuming a 30% discount to current prices for all unsold inventory, and 2)
taking into account the potential additional cost of SGD0.36/share if no additional unit is sold even after the discount is offered.

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