PropNex Limited - Phillip Securities 2019-06-03: Growing Its Piece Of The Transactions Pie

PROPNEX LIMITED (SGX:OYY)

PropNex Limited - Growing Its Piece Of The Transactions Pie

Largest real estate agency with demonstrated ability to expand inorganically.
PropNex is still gaining market share. It has managed to push through to be among the top two agencies with the biggest market share of transactions for new launches.
Agent-focused business model with multiple scheduled trainings, ‘bootcamps’ and conventions through the year to engage and educate its agents.
Initiate coverage on PROPNEX LIMITED (SGX:OYY) with a BUY and Target Price of S$0.63.

PROPNEX LIMITED (SGX:OYY) is a real estate services company, comprising the brokerage (PropNex Realty Pte Ltd), training, property management and consultancy businesses.
PropNex was listed on 2 Jul, 2018 and is currently the largest real estate agency in Singapore, in terms of number of agents. The Group owns the rights to its proprietary “PropNex” brand and counts Jones Lang LaSalle (JLL) as a shareholder of its PropNex International arm.

PropNex currently holds the #1 title in terms of the number of real estate agents in Singapore, only recently jumping up from #2 position in 2017, after successfully merging with Dennis Wee Realty in July 2017. This expanded its agent count by 20% in 2018.
Subsequently in Feb 2019, it entered into a strategic collaboration with Global Alliance Property (operating under the Century 21 franchise) for its agents to be transferred to PropNex. Its current agent count stands at 7,837, a 17% increase from 2018 even already increasing by 20% the year before.

PropNex had previously not been among the first port-of-calls for property developers when it comes to new launches. It had only in recent times gradually earned market share in this particular segment.
While agent count does not correlate with market share of transactions, PropNex has managed to push through to be among the top two agencies with the biggest market share of transactions for new launches. Its market share of transactions in the other segments had also increased within the same period.

PropNex is vested in the engagement and rewarding of its agents. It holds regular jumpstart trainings, power sales booster trainings, post cooling measures trainings and quarterly conventions. These trainings and conventions are intended to help its agents properly guide potential homebuyers during the process.

Our DCF-derived target price of S$0.63 is based on a cost of equity of 7.2% and a terminal growth rate of 0%.
PropNex is currently trading at a P/E of 8.92x, which is at the -1 s.d. level since its listing, and at a c.40% discount from that of its regional peers. See PropNex's share price history.
See attached 29-page PDF initiation reports for complete analysis on Singapore property agencies - APAC REALTY LIMITED (SGX:CLN) and PROPNEX LIMITED (SGX:OYY).

Tara WONG Phillip Securities Research | https://www.stocksbnb.com/ 2019-06-03

SGX Stock Analyst Report BUY INITIATE BUY 0.63 SAME 0.63