PropNex - Phillip Securities 2020-11-16: More Resilient Than Expected

PROPNEX LIMITED (SGX:OYY) | SGinvestors.io PROPNEX LIMITED (SGX:OYY)

PropNex - More Resilient Than Expected

  • PropNex (SGX:OYY)'s 3Q20 PATMI rose 10.6% y-o-y to S$6.8mn, far exceeding our forecast. 9M20 earnings form 111% of our FY20e forecast. Despite lockdown, new project revenue was more resilient than expected.
  • Revenue from new projects rose 15% y-o-y to S$51.9mn. Higher market share, billing of earlier projects and successful virtual selling were some of the reasons.
  • Net cash of S$94.7mn, up from 3Q19’s S$74.5mn.
  • Maintain BUY on PropNex with a higher DCF Target Price of S$0.85, from S$0.70. Circuit breaker might have affected resale and rental revenue but not new project sales. Yields of 6% and cash flows of S$28mn p.a. with modest capex and working-capital requirements are what we like about PropNex.



The Positives


Project marketing resilient.

  • 2Q20 new home sales for the industry were down 27% y-o-y. We had expected the weakness to spill into this quarter as there is usually a lag of 2-3 months before revenue is billable. PropNex was resilient due to market-share gains, delays in prior sales due to options re-issuance and its ability to market projects virtually.

Cash kept piling up.

  • PropNex's 9M20 operating cash flow was S$30mn (9M19: S$21mn). As capex was minimal at S$0.2mn, cash buffer should be sufficient to meet our dividend forecast of S$14.8mn (DPU of 4 cents).


The Negative

  • Nil.

Outlook

  • Resale volumes are recovering as consumer sentiment improves. HDB resales should be supported by enhanced grants for HBD purchasers introduced late last year and delays in BTO completions.
  • Meanwhile, project sales could enter a near-term lull in October and November due to delays in new launches. In September, URA had restricted developers from re-issuing options. Potential buyers will likely need greater clarity and time before disposing of their existing properties and committing to new purchases.

Maintain BUY with higher Target Price of S$0.85, up from S$0.70






Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2020-11-16
SGX Stock Analyst Report BUY MAINTAIN BUY 0.85 UP 0.700



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