PROPNEX LIMITED (SGX:OYY)
PropNex - Asset Light Business Model Showing Resilience
- PropNex (SGX:OYY)’s core business is in the provision of real estate agency services and project marketing services to its clients. Agency services relate to the sale and lease of public and private residential and commercial/industrial properties, and project marketing services involve marketing for new private residential development projects for third-party property developers.
- PropNex also provides training services to real estate agents which serve as recurring income. In addition, PropNex is also building up their consultancy services business segment.
Stronger sales and profit recorded in 1QFY21 with high demand.
- PropNex's revenue increased 63.3% y-o-y to S$220.6 million in 1QFY21, mainly from an increase in commission income from agency services of S$47.5m and project marketing services of S$38.0m. This was after reporting a 22.8% y-o-y increase in revenue to S$515.6 million in FY2020. Q1 revenue alone made up 42.8% of FY2020’s revenue.
- PropNex's 1QFY21 profit almost doubled, surging 95.7% to S$14.8m. Drivers of growth were mainly higher transaction volume, attractive mortgage rates and increase in referral fee income (S$0.4m) and government grants (S$0.2m).
Property price run-up likely to continue.
- Even with property cooling measures that may come into play, and the newly imposed COVID-19 restriction measures, we expect home prices to remain resilient with higher developer costs that will translate to higher property prices, and the low inventory in the market. Property investments by high-net-worth individuals will also contribute to the increase.
Initiate with a HOLD rating, at fair value of S$1.27.
- Our target price for PropNex is based on a FY21E P/E ex-cash of 9.2x, in line with the Singapore peer comparison P/E ex-cash.
- We expect sales volume to continue growing in 2021. We also expect that property prices will continue to rise. However, we remain cautious with possible property cooling measures that may come.
- Our target price implies a 7.6% upside to the last traded PropNex's share price.
- Key Risks: Probable property cooling measures, competition from other real estate agency firms.
- See
- See the 13-page PDF report attached below for complete analysis on PropNex (SGX:OYY).
Lim Li Jun Tracy
SAC Capital Research
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https://www.saccapital.com.sg/
2021-05-18
SGX Stock
Analyst Report
1.27
SAME
1.27
