PropNex - Phillip Securities 2019-12-16: Market Leader Recovering


PropNex - Market Leader Recovering

  • Largest real estate agency with market share rising to around 46% for primary launches.
  • Expect recovery in property transaction volumes.
  • Organically expanding agency force and building an overseas footprint.
  • Maintain BUY with an unchanged target price of S$0.59.

PropNex - Background

PropNex - 2020 Investment Merits/ Outlook

Largest real estate agency.

  • PropNex is the largest real estate agency in Singapore in terms of the number of real estate agents. It has a large market share in new private residential launches (~46%), private resale (~40%) and HDB resale (~47%). Only private rental’s market share is lower at 27%. We expect market share to increase further as the agency force expands.

Property transactions are recovering, except resale.

  • When we split the business into four key segments, only private resale looks the weakest for 2020.
    • Private resale (20% of revenue) is down 27% in 3Q19. There is wide gap in bid and offer prices as there is no urgency on both sides to transact;
    • HDB resale (17%) will register a recovery next year following an expansion in grants to resale buyers; and
    • Project marketing (38%) will benefit from a huge pipeline of launches.

Housing demand boosted by higher HDB grants.

  • The recent relaxation of grants for the purchase of HDB homes will be a boost to the upgraders markets.
  • On 11 September, the authorities raised the income eligibility and size of grants for the purchase of HDB homes. The relaxation was more generous when purchasing resale units. In addition to a rise in income ceiling (from S$5,000 to S$9,000), the size of the grant was increased (from S$120,000 to S$160,000). Around 25,000 HDB units have reached their minimum occupation limit. The grants can help to stimulate the HDB resale market and consequently, the private mass residential market.

Organic growth from expanding agency force and overseas expansion.

  • As the agency force continues to grow, this provides a foundation to maintain share and grow organically. The number of agents has grown by 15% to around 8,500 this year. We think PropNex is building a foundation overseas as more developers become reliant on agencies to move their product.
  • PropNex’s salesforce in Malaysia surged impressively from 60 in March 2018 to 500 at present. Malaysia will still be a small contributor in the next few years but it will be an added driver to growth in future, in our opinion.


  • Maintain BUY with an unchanged target price of S$0.59. See PropNex Target Price; PropNex Analyst Reports.
  • We like PropNex for the high return on equity from the business (20%), large and rising market share of transactions and an attractive dividend yield of 7%. Excluding the net cash of S$73mn, PropNex currently trades at a P/E of 7x.

Paul Chew Phillip Securities Research | 2019-12-16
SGX Stock Analyst Report BUY MAINTAIN BUY 0.590 SAME 0.590