APAC Realty - RHB Invest 2021-02-24: Proxy To Strong Residential Volumes; Stay BUY


APAC Realty - Proxy To Strong Residential Volumes; Stay BUY

  • APAC Realty's FY20 net profits comfortably beat consensus aided by a rebound in residential volumes and government grants. Sales momentum continues to remain strong with January new home sales hitting an eight year high.
  • APAC Realty is well positioned to benefit with the group commanding ~33% market share of total residential transactions.
  • Keep BUY and target price of S$0.55, 28% upside and ~6% dividend yield. APAC Realty’s FY21F P/E of 9.7x is 15% lower than the P/E of its closest peer PropNex (SGX:OYY) (based on the FY21 Bloomberg estimate of 11.3x).

APAC Realty's FY20 net profit up 18% y-o-y

  • APAC Realty (SGX:CLN)'s FY20 net profit up 18% y-o-y driven by a strong recovery in residential sales in 2H and a Government grant under the Jobs Support Scheme of S$1.9 m. FY20 private new home sales (excluding executive condominiums) was up 0.7% y-o-y to 9,982 units and private resale volume rose 18% y-o-y to 10,927 units.
  • For FY21 we expect new sales (0-5% higher) and resale volume (0-10% higher) to remain robust, underpinned by ultra-low interest rates and economic recovery.
  • Our FY21F net profit forecast for APAC Realty, excluding one-off Government grants (FY20), is expected to grow by 8%. A key risk is the implementation of additional cooling measures and resurgence of COVID-19.

Dividend yield of ~6%.

  • APAC Realty announced a total dividend of 2.5 cents (FY19 2.0 cents) for FY20 translating into a pay-out of 54.3% (in-line with guidance of 50-60%) and we expect similar dividends for FY21.

Market share and agent count showing improvement.

  • Based on its internal estimates, ERA secured an overall residential market share of ~33.3% in FY20 (FY19: 32.9%). While its new sale market share was slightly lower for FY20 at 31.3% (FY19: 34.6%) it gained market share in the buoyant private resale market FY20 of 36% (FY19: 33.3%) while maintaining its leadership position in the HDB resale market.
  • ERA Singapore’s agent count has also jumped to 7,771 agents as of end FY20 (FY19: 6,967) with agent market share of ~26% from 23% last year. For FY21F the company has secured marketing agent role for 24 projects (8,802 units) similar to the one in FY20.

Minimal overseas contributions so far but looking at long-term potential.

  • ERA’s overseas entities (Indonesia, Thailand, Vietnam and Malaysia) were impacted by a market slowdown due to COVID-19 and were slightly loss making for FY20. Management however remains optimistic on the longer-term prospects of these markets and sees it as a long-term diversification strategy to mitigate the cyclicality of Singapore market.

Revised up FY21-23F net profits forecast

Vijay Natarajan RHB Securities Research | https://www.rhbinvest.com.sg/ 2021-02-24
SGX Stock Analyst Report BUY MAINTAIN BUY 0.550 SAME 0.550