APAC Realty - CGS-CIMB Research 2021-08-13: A Big Dividend Surprise


APAC Realty - A Big Dividend Surprise

  • APAC Realty's 1H21 EPS of S$0.048 is above our expectations, at 57.7% of our FY21F forecast.
  • Brokerage commission surged across new home sales, private and HDB resale segments in 1H21.
  • We reiterate our ADD rating for APAC Realty with a higher target price of S$0.96.

APAC Realty's 1H21 results highlights

  • APAC Realty (SGX:CLN) reported a 107.4% y-o-y jump in revenue to S$358.4m, led by higher real estate brokerage fees and related services revenue. Gross profit increased a smaller 62.7% y-o-y to S$35.3m as gross profit margin declined to ~9.8% (vs. 12.5% in 1H20).
  • 1H21 net profit more than doubled y-o-y to S$17m. In line with its robust financial performance, APAC Realty has declared a total dividend of S$0.065 per share (interim dividend: S$0.035, special dividend: S$0.03), translating into a yield of 7.3%.
  • APAC Realty also guided that it has established a policy of distributing 50- 80% of its profits as dividends, on a semi-annual basis.

Higher volumes drove resale and rental commissions in 1H21

  • APAC Realty generated S$220.1m or ~61.7% of its topline from commission income from resale and rental of properties in 1H21. The 95% y-o-y surge was achieved through a 228.6% increase in private resale transaction volume and a 57.1% pick-up in HDB resale activity. APAC Realty indicated that its market share of residential sales transactions improved to 41.1% in 1H21. In addition, the private rental market volume also improved 17.9% y-o-y in 1H21.
  • Looking ahead, we believe that the resale residential market would likely remain robust, in tandem with the primary residential segment.

New home sales brokerage more than doubled in 1H21

  • Brokerage revenue from new home sales surged 146.2% y-o-y to S$133.7m in 1H21 due to a strong pick-up in new home sales activity and an improvement in market share to 32.1%. APAC Realty has year-to-date secured marketing agent roles in 25 projects.
  • Given the low interest rate environment and declining quantum of unsold inventory, we believe that buying interest should remain strong. With the majority of these projects located in the city fringe and suburban areas, we believe these projects are likely to be well-received when marketed, in our view. As such, we believe APAC Realty’s performance should continue to benefit from the volume transaction upswing.

Reiterate ADD rating for APAC Realty

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2021-08-13
SGX Stock Analyst Report ADD MAINTAIN ADD 0.96 UP 0.940