APAC Realty - DBS Research 2020-02-25: Moderate Growth Ahead

APAC REALTY LIMITED (SGX:CLN)

APAC Realty - Moderate Growth Ahead

APAC Realty (SGX:CLN) reported a strong 4Q19, with net profit up 33% y-o-y (+58% q-o-q) to S$5.4m, on the back of a 32% y-o-y (+9% q-o-q) increase in revenue to S$107.8m. The increase in revenue was mainly due to higher brokerage income contribution from new home sales, accounting for 79.1% of total revenue.
For FY19, net profit of S$13.9m (-42.8% y-o-y) was 15% above our forecast. Total revenue of S$369.5m was 12.8% weaker than FY18.
In terms of property transaction value, the whole property market registered a 10% decline as compared to FY18.
Among the various segments, the primary market increased 16.7% but the secondary market was weak, down 30.2%. The leasing and HDB segment were stable with 2% growth for each.

A final DPS of 1.25cts was declared. Including the interim DPS of 0.75cts, APAC Realty's FY19 DPS amounted to 2cts (vs 4.5cts in FY18), representing a dividend payout ratio of 51% (66% in FY18).

As at January 2020, APAC Realty has about 7,048 agents, +8.5% y-o-y, with market share of c.23%.

ERA’s overall market share in terms of transaction value was 32.8% is slightly lower than the 33.9% in FY18. The weakness was mainly in the primary market, where ERA’s market share dropped to about 34.4% from c.40.6% in FY18. One of the reasons could be that ERA does not encourage the extension of the sale and purchase (SNP) agreement, unlike its key competitors.

To date, ERA has secured marketing agent appointments for 43 projects in 2019 and another 25 projects for 2020. The total number of unsold private residential units stood at 32,272 as at end 2019. The vacancy rate of completed private residential units continues to trend downwards and reached 5.5% as at 31 December 2019, coming down from a high of 8.9% as at 30 June 2016.
Apart from the 32,2721 unsold units (including ECs) with planning approval as at 31 December 2019, there is a potential supply of 6,050 units (including ECs) from Government Land Sales (GLS) sites and awarded en-bloc sale sites that have not been granted planning approval yet.

As of now, other than more precautious measures put in place, APAC Realty is still not seeing any delay in project launch due to Covid-19. However, the situation remains fluid and evolving.

We have revised our earnings estimate up by 18%/15% for FY20F/FY21F, after imputing a higher base for FY19. Accordingly, our Target Price is raised to S$0.52 (Previous S$0.46), pegged to peers’ average PE of 12x on FY20F earnings.
Maintain HOLD.
See APAC Realty Share Price; APAC Realty Target Price; APAC Realty Analyst Reports; APAC Realty Dividend History; APAC Realty Announcements; APAC Realty Latest News.

Lee Keng LING DBS Group Research | https://www.dbsvickers.com/ 2020-02-25

SGX Stock Analyst Report BUY MAINTAIN BUY 0.52 UP 0.460