APAC Realty - CGS-CIMB Research 2020-02-21: Strong Performance In 4QFY19


APAC Realty - Strong Performance In 4QFY19

  • APAC Realty (SGX:CLN)’s 4Q/FY19 EPS of 1.54/3.94 Scts are broadly in line with expectations, at 37%/96% of our FY19 forecast.
  • 4Q performance boosted by higher income from new home sales and improvement in share of resale market transactions.
  • We reiterate our ADD rating, with a lower Target Price of S$0.61.

4Q/FY19 results highlights

  • APAC Realty (SGX:CLN) reported a 31.7% y-o-y jump in 4Q19 revenue to S$107.8m, while gross profit rose 35.7% y-o-y to S$15.2m. Gross profit margin rose 0.4% pt to 14.1%. 4Q net profit came in at S$5.5m (+33.3% y-o-y).
  • For FY19, APAC Realty reported a net profit of S$14m (-42.2% y-o-y) as gross revenue declined 13.1% y-o-y to S$369.5m. Results were broadly in line with our expectations, at 96% of our FY19 forecast.
  • APAC Realty declared a final DPS of 1.25 Scts, bringing total DPS for FY19 to 2 Scts, which translates into a yield of c.4.3%.

4Q performance boosted by higher income from new home sales

  • The better 4Q performance was due to higher brokerage income contribution from new home sales, which jumped 79% y-o-y to S$42.1m. This was in tandem with a market pick-up in primary volume transactions due to a low base in 4Q18, post-property cooling measures. APAC Realty garnered a c.36% market share of primary transactions in FY19.
  • In addition, brokerage income from resale market transactions and rental of properties also increased 11.9% to S$62.8m. Its market share of resale transactions ticked up in 4Q and raised its FY19 market share to 33.4%.
  • Going into FY20F, APAC Realty indicated it has a network of 7,048 agents as at 1 Jan 2020 and had secured a healthy pipeline of marketing appointments, with 25 projects (7,466 units) to be launched this year.

Regional expansion strategy gaining ground

  • In terms of its regional expansion strategy, the group has 6,500 agents across 114 member brokers in Indonesia, while ERA Thailand posted positive performance in FY19. It has 420 agents across 22 member brokers in Thailand and had closed c.1,000 units of primary and secondary transactions in FY19. We anticipate these overseas operations to continue to gather momentum from FY20 onwards.

Reiterate Add, with a lower Target Price of S$0.61

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-02-21
SGX Stock Analyst Report ADD MAINTAIN ADD 0.61 DOWN 0.66