APAC REALTY LIMITED (SGX:CLN)
PROPNEX LIMITED (SGX:OYY)
SGX Listed Property Brokers - Riding On Positive Tailwinds
- We expect strong 2Q/1H21F results for property brokers PropNex and APAC Realty.
- We raise our FY21-23F EPS on robust residential volumes; dividend yield remains attractive.
- Reiterate sector Overweight; maintain ADD on APAC Realty (SGX:CLN), lower our rating on PropNex (SGX:OYY) to HOLD.
Expect strong set of results in 2Q/1H21F for property brokerages
- In our preview of their upcoming results, we expect property agencies such as PropNex (SGX:OYY) and APAC Realty (SGX:CLN) to post a strong set of 2Q/1H21F results, underpinned by a robust residential market.
- Taking into account a lagged billing effect, we expect property agencies to benefit from the 40% y-o-y jump (+29% h-o-h) in transaction values of 2H20 private new and resale residential deals, as well as Housing Development Board (HDB) resale transactions, which should translate into strong growth in 1H21F topline and bottomline.
Tailwind from a robust physical market
- According to Urban Redevelopment Authority (URA) data, primary home sales totalled 2,966 units in 2Q, bringing 1H numbers to 6,459 units (+67% y-o-y). At the same time, according to Singapore Real Estate Exchange (SRX), resale condo transactions are more than three-fold higher in 1H21 vs a year ago. As buyers complete their purchases, brokerage fees from these transactions are likely to underpin brokerage revenue in 2H21F.
- Overall, we maintain our expectation for new home sales to reach up to 10,000 units for 2021F, with prices expected to appreciate by up to 5%.
We raise our FY21-23F earnings forecast, dividend yield remains attractive
- We raise PropNex and APAC Realty’s FY21-23F earnings per share forecast by 11.5-33.2% to take into account the robust primary and resale private residential and HDB resale volume transactions as well as adjusting for the quantum of backlog recognition.
- Consequently, our dividend projections are also raised, assuming an unchanged FY20 payout ratio of 70% for PropNex and 54% for APAC Realty. At the current price, our projected FY21F dividend yield for PropNex and APAC Realty ranges between 4.8-5.5%, still attractive when compared to the broader markets’ 2-3%, in our view.
Retain sector Overweight, maintain ADD on APAC Realty
- We continue to like property brokers for their asset light business models and as beneficiaries of the active residential property market. On the back of higher earnings forecasts, our target prices for PropNex and APAC Realty are raised to S$2.05 and S$0.94, respectively, based on a blend of net cash-adjusted P/E multiple and DCF valuations.
- At the current price, PropNex is trading at 14.5x FY21F P/E; hence, we lower our rating to HOLD on valuation grounds. We believe any significant downside in share price could be mitigated by the still attractive projected FY21F dividend yield of 4.8%. See PropNex's Share Price and PropNex's Dividend History.
- We maintain our ADD rating for APAC Realty as the stock is trading at inexpensive 9.9x FY21F P/E multiple and offers projected dividend yield of 5.5%. See APAC Realty's Share Price and APAC Realty's Dividend History.
- Key catalysts include stronger-than-projected market transaction volumes while downside risk for our sector view is property cooling measures that could derail near-term buying interest.
- See report attached below for complete analysis.
- See also reports:
LOCK Mun Yee
CGS-CIMB Research
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https://www.cgs-cimb.com
2021-08-10
SGX Stock
Analyst Report
0.940
UP
0.865
2.050
UP
1.19
