PROPNEX LIMITED (SGX:OYY)
PropNex - Reinforcing Another Record Year
- PropNex (SGX:OYY)'s 1Q21 results beat by a large margin. Revenue and PATMI were 40%/51% of our forecasts. Private resales were up the most, by 91% y-o-y to S$55mn. Revenue growth of 63% was led by all segments.
- PropNex's PATMI almost doubled y-o-y to S$14.8mn, raising net cash to S$118.9mn (4Q20 S$105.8mn; FY19 S$81.6mn). Operating cash flows were S$13mn.
- BUY call maintained for PropNex with higher DCF target price (WACC 9.8%) of S$1.36, from S$1.00.
The Positives
Across-the-board revenue spurt.
- Every category of commission revenue grew, including rental and landed properties. Leading the growth were private resales. The need for larger space and a price gap with new homes drove demand for such units. New home sales were also supported by HDB upgraders.
Piling up cash.
- PropNex's net cash broke a new record of S$118.9mn (4Q20: S$105.8mn). This was supported by record earnings and S$13mn of operating cash flows. Curiously, finance income declined 70% y-o-y to S$94k .
- Our dividend estimate for PropNex in FY21e has been raised from S$0.06 to S$0.065 per share. Annual payout of S$24mn should be well covered by operating cash flows of S$40mn and net cash.
The Negative
- Nil.
Outlook
- The momentum in property transactions is building up to a record year post TDSR measures in 2013. New home sales and private resales in 1Q21 jumped 63% and 117% y-o-y respectively. Support came from low interest rates, delays in BTO completions, HDB upgraders and buyers worried of an unrelenting rise in property prices as land and construction costs escalate. The mass market remains in a sweet spot with its S$1-1.5mn pricing.
Cooling measures.
- The authorities are monitoring the market closely and any double-digit rise in property prices will be a concern. Cooling measures could kick in if 2Q21 prices rise 4% or more q-o-q.
COVID-19 lockdown.
- Training and viewing have partially transitioned to a virtual mode. Customers will narrow their selection of properties before any physical viewing. Despite these limitations, transactions have been healthy.
Maintain BUY with higher target price of S$1.36, up from S$1.00
- We raise PropNex's FY21e PATMI forecast by 34% to S$41.3mn as we bump up revenue by 23% to S$675mn. Valuations are based on DCF to btter account for any volatility in earnings and property transactions.
- The buoyant property market implies further upside. That said, we build in a buffer given the recent COVID-19 lockdown and potential property-cooling measures.
- Yields of 5.7%, S$119mn net cash and 33% ROEs remain PropNex’s investment merits.
- See
Paul Chew
Phillip Securities Research
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https://www.stocksbnb.com/
2021-05-16
SGX Stock
Analyst Report
1.36
UP
1.000
